By Benadetta Chiwanda Mia:
The decision to reduce Malawi’s development budget from K1.77 trillion to K1.58 trillion in the revised 2024-25 national budget has been met with criticism from economic experts, who argue that the cuts could hinder the country’s growth prospects.
Malawi Economic Justice Network (Mejn) Executive Director Bertha Phiri has described the cut as “uncalled for” and potentially detrimental to the country’s development objectives.
Presenting the mid-term budget statement to Parliament on Wednesday, Finance Minister Simplex Chithyola Banda announced that both domestically and foreign-financed components of development expenditure had been reduced by K110.5 billion and K76.8 billion, respectively.
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In a written response, Phiri emphasised that budget reductions should primarily target recurrent expenditures rather than development initiatives.
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She also expressed concern over the underperformance of revenue and grants, noting that by mid-year, total revenue and grants for the 2024-25 fiscal year stood at K1.72 trillion, falling short of the projected K2.22 trillion.
Domestic revenue was projected at K1.63 trillion, with tax revenue contributing K1.56 trillion and other revenue K79.3 billion.
The actual domestic revenue for the first half reached only K1.50 trillion, marking an 8.2 percent shortfall.
“We acknowledge the significant underperformance of grants and domestic revenue. The pressing question is whether we can expect an improvement in the remaining half of the year. Alarmingly, recurrent expenditures, particularly employee compensation, have surged,” Phiri said.
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Despite positive projections of revenue and grants potentially reaching K2.90 trillion in the second half, Phiri expressed reservations about achieving these targets amid ongoing challenges in key sectors such as mining, agriculture and trade, which have growth forecasts of only around 1 percent.
Economic expert Mavin Banda also expressed concern over the absence of austerity measures in the budget’s implementation.
“The public anticipated cost-saving tactics to accompany the new tax measures.
“However, the minister wisely avoided premature expenditure cuts, which could jeopardise the social welfare capacity due to rigidities in other areas of spending,” Banda said.
Banda pointed out that budget expenditures were not adequately aligned with growth strategies such as the Malawi Implementation Plan (MIP- 1) of the Agenda 2063, whose progress stands at roughly 4 percent.
He suggested that the focus on austerity was driven by shortfalls in revenue rather than deviations in planned spending.
