Zero-budgeting: can government raise enough funds?
When Bingu wa Mutharika championed the zero-budgeting, there was discontentment across the country over the move. Some people viewed it as ambitious. Others said it was unrealistic. But we will now be rooted to it. With the donor community withholding funds for budgetary support because of dissatisfaction with the massive looting of public resources during Joyce Banda’s presidency, government has no choice, but to go it alone and look for survival methods to keep the economy functioning.
With the Cashgate scandal, donors are reluctant to continue supporting a government that is not serious with prudent financial management. They might have realised that other than theft of public funds, there is also widespread misuse of funds and they do not want their funds to be misappropriated.
Zero budgeting is a major test for government whether it will really work. While it has received criticisms from a cross section of Malawians, its benefits cannot be ruled out completely. It will make government focus on priority areas and every year the budget will be looked at without reference to previous costs. Government will be re-evaluating each cost every year. This means each budget line will be revisited to assess its contribution to government’s development goal.
Secondly, it will reduce donor dependency. Donors have been contributing 40 percent of the budget. This will now make government ‘mature’ and fend for itself; and not to look to donors for assistance. This also means the budget will not have any strings attached. Donors, especially Western countries, have stringent lending conditions. This effectively means donors will not “interfere” in government’s development agenda.
The onus is on government to prove they can mobilise local resources to implement priority projects without donor support. But the question is: can government raise adequate funds or be disciplined enough to use funds for the intended purpose? Obviously, to finance the budget entirely from local resources is one of the major challenges that government has to overcome. It is not clear how government will finance the various programmes. The tendency has been to raise taxes and borrow from the public through open market operations, a development which has led to public debt rising. As a long term measure, government needs to widen the tax base. But more importantly, come up some investment ventures such as starting a fully-fledged commercial bank.
If one looks at the revenue Malawi Revenue Authority (MRA) collects on monthly basis through various tax regimes, one realises that government can go a long way in financing many of the development projects. However, the challenge has been how the money is utilised. A lot of resources are consumed by the political elite through lavish spending with very little trickling down to the majority.
This is the time for ministers, government officials, those in state-owned enterprises and elected officials to make sacrifices. If anything, government should now reduce the astronomical allowances and benefits of ministers and those in state-owned enterprises. Only poor people have been making sacrifices through high price of commodities while the ministers, government officials and senior officials in parastatals have been wallowing in riches. This is unacceptable. For example, when former president Joyce Banda was misled by Western countries and local economists to devalue the currency by a massive 48 percent in 2012, salaries and allowances of ministers were hiked by almost the margin, leaving the majority poor to absorb the high cost of living while leaders lived in opulence. True leadership is about scarifies and good leaders suffer with their people.
In light of the zero-budget, many bad practices that drain resources should be stopped. For example, ministers should be dissuaded from undertaking unnecessary travels both within and outside Malawi. The practice by ministers welcoming or escorting the president at the airport should be discontinued. It beats any reasoning that a minister should drive to Blantyre from Lilongwe just to escort or welcome the president. Similarly, the relevant minister should be presiding over the function rather than the president because when he travels a lot of people also travel, which escalates costs.
Aid can only go so far. Aid can only provide relief, but it doesn’t provide economic transformation. Economic transformation in the long-term, where people learn skills, where they earn high and rising standards of wages and of living, comes from locally run, locally owned businesses. And that’s what’s been missing from the development discussions in Africa and Malawi included.
Apart from our government having financial discipline we seriously need to put much funding in promoting Small and Medium Enterprises (SMEs) and in that case Entrepreneurship. If you look at countries like America, it was largely built by Entrepreneurs contrary to what others think that it must be the government, you can prove this by watching a documentary called “The men who built America”. This is why people like Henry Kachaje preach much about Entrepreneurship. In Malawi our industry is too small, hence the government can also not generate sufficient tax revenue to fund its development projects and operations. So, yes we need to put stringed controls on the little we have, but in the longer term lets have an abundance mentality by increasing our capacity to produce. Other African countries like Rwanda and Kenya are on the right path to this, we can learn from them, it is possible and remember, the government has its role to play, you and me also have our roles to play.