Global economic think-tank, the Economists Intelligence Unit (EIU) has projected a continuous cut in government expenditure’s proportion to the Gross Domestic Product (GDP) in the short to medium terms.
The EIU, as quoted by portfolio management and advisory firm, Bridgepath Capital Limited, says the estimated squeeze in government’s expenditure is in line with the International Monetary Fund (IMF)’s requirement that it consolidates its fiscal path.
“In terms of government expenditure, the EIU expects that the IMF programme would require that the government controls expenditure over the remainder of the forecast period.
“As such, the EIU expects expenditure to decline as a proportion of GDP in the early years of an IMF programme and to rebuild in 2025,” reads the report.
The EIU anticipates expenditure as a proportion of GDP to decline to 28.3 percent of GDP in 2026-26 and that the public debt to GDP ratio to decline to 70 percent of GDP.
But Finance Minister Sosten Gongwe, Thursday said the government is working towards addressing the fiscal space challenges as a perquisite.
“We need to relook at our expenditures to help contain inflationary pressures and this has nothing to do with IMF,” he said.
The anticipated decline in public expenditure will coincides with a tough economic environment as inflation is reaching records high around the globe and Malawi in particular.
As at June, inflation rate for Malawi was seen at 23.5 percent and Malawi’s imports continue rising in prices as fertiliser prices have skyrocketed by over 100 percent and fuel prices have danced to the same tune.
In an interview yesterday, economics lecturer at Malawi University of Business and Applied Sciences Betchani Tchereni said reducing public expenditure is not only achievable but also feasible in line with the challenges the economy has been sailing through.
He said this can be attained by removing or reducing some expenditure that are not in the best interest of economic development while focusing on things that will develop the economy.
“We can even pass that percentage if we play it right by removing or reducing expenditures such as vehicle purchases or allowances and other expenditure that cannot help in developing the economy or making it grow,” Tchereni said.
In June this year, government announced and implemented expenditure control measures which included a cut on international travels for the president and his cabinet and a suspension on purchase of new vehicles.
This month, Secretary to the President and Cabinet Collen Zamba announced more measures which aim at reducing fuel consumption in government Ministries, Departments and Agencies.
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.