Local economic think-tank, the Economics Association of Malawi (Ecama) has reiterated a call for prudence in public finance management in the wake of resumed direct budget support.
Ecama President Bertha Chikadza said this in an interview last week after the African Development Bank (AfDB) board approved $23 million (about K40 billion) direct budget support for Malawi.
It also comes as Malawi’s other partners including the European Union hinted at resuming direct budget support following the country’s securing of an Extended Credit Facility (ECF) programme of the International Monetary Fund in November last year.
The ECF arrangement brings financial assistance to countries like Malawi, with a volatile balance of payments position—a record of all transactions by a country and the rest of the world. It helps mitigate foreign exchange scarcity on the market.
The arrangement is also touted for its “signalling effect” of triggering direct budget support and restoring donor confidence.
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According to Chikadza, after decades of ‘off-budget support’, the country must have drawn lessons on retaining donor trust and confidence. “I think the government has learnt its lesson because the off-budget financing really impacted us a lot.
“So the government just has to be very prudent, very open and make sure that whatever money comes has to be spent on the intended purpose,” she said.
Chikadza reiterated a call for transparency on public funds management, challenging the Treasury to ensure that government agencies are operating within set expenditure ceilings.
According to Chikadza, the reinstated donor confidence can only be sustained if the government is prudent.
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“The government should make sure that it is very transparent. Otherwise, we will go into a situation where donors will be funding off-budget and that will affect us negatively,” she said.
In a separate interview, Minister of Finance Simplex Chithyola Banda said the resumed budget support is a reflection that economic reforms the government adopted are working.
The coming in of the direct budget support is expected to lessen fiscal pressure the country has been facing in recent years.
For instance, of the K5.98 trillion 2024-25 budget, grants are estimated at K1.17 trillion, of which K1.10 trillion will come from international organisations and K72.69 billion from foreign governments.
Total expenditure for the 2024-25 fiscal year is programmed at K5.98 trillion, representing 31.9 percent of GDP.
Of the total expenditure, recurrent expenses are estimated at K4.21 trillion, representing 22.5 percent of GDP and 70.4 percent of total expenditure.
Development expenditure is estimated at K1.77 trillion, of which K1.39 trillion is for foreign financed projects and K383.6 billion is for domestic financed projects.
