Parliament is meeting next month for, among other things, a review of the 2022-23 National Budget which already is said to have gone off-track with most parameters it was premised on losing shape.
This year’s K2.8 trillion National Budget was planned with a glaring K884.04 billion deficit or an equivalent of 7.7 percent of Gross Domestic Product, of which, K653.98 billion was meant to be covered through domestic borrowing.
The annual financial plan, whose implementation period commenced in April 2022 was anchored on assumptions that the real gross domestic product (GDP) will grow by 4.1 percent in 2022 and 4.0 percent in 2023, inflation rate will average 9.1 percent during the fiscal year, and that the policy rate will be at 12 percent among others. But all these targets have been missed.
Instead, the economic growth has been revised downwards to 1.7 percent; average inflation has been adjusted to 23.2 percent while policy rate—the rate at which commercial banks use when borrowing from the central bank as lender of last resort—is now at 14 percent since May.
Also, there have been glaring disparities between revenue and expenditure over the first months of the financial calendar.
For example, during first month of the financial year in April, Treasury reported a K127 billion deficit, which, however, went down to K91.1 billion in May, further down to K74 billion in June, and to K53.3 billion in July and then to K44.8 billion in August.
Local economic think-tanks the Economics Association of Malawi (Ecama), believes the Treasury should seriously consider addressing the challenges by, among other things, aligning expenditure to revenue to mitigate the prevailing pressure.
Ecama Executive Director Frank Chikuta said there is still prevalent pressure on expenditure which may widen the deficit and increase debt; therefore the budget should align expenditure to revenue especially for essential products.
“The budget should look at where the expenditures can be rationalized and look at areas where revenue collection can be enhanced to make sure that the programmed deficit is maintained,” he said.
Centre for Social Concern Coordinator responsible for Economic Governance Bernard Mphepo said in a separate interview that with the rising cost of living, the priority for the budget should be to cushion the poor from run-away inflation.
Mphepo added that other areas that the budget should look at are debt reduction, austerity measures by discouraging unnecessary trips and expenditures on luxury stuff and ensuring food security among others.
“Food inflation is one of the drivers of inflation in Malawi and we are heading for a year where we might be food insecure, a development which may drive inflation further. Therefore the budget should also look at that,” he said.
Minister of Finance Sosten Gwengwe has been saying the budget implementation remains, amid the challenges.
He, however, admitted that the annual expenditure needs some alignments during the review.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.