By Benadetta Chiwanda Mia:
A recent financial report by the Reserve Bank of Malawi (RBM) has revealed a sharp drop of K588.6 billion in development expenditures to K88.7 billion in the first quarter of the 2024-25 financial year.
This, the central bank, attributes to non-receipt of foreign project financing.
In the Finance and Economic Review published last week, RBM said the shortfall in development expenditure has resulted in a 15.7 percent decrease in total government expenditures, falling by K242.0 billion to K1.3 trillion in the second quarter of 2024.
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Additionally, the report notes that total revenues in the second quarter of 2024 were estimated at K743.3 billion, which is a 35.7 percent decline from the K1.2 trillion recorded in the preceding quarter.
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The revenue decrease can be attributed to a significant K409.3 billion decline in grant collections to K98.0 billion, coupled with a K23.7 billion reduction in non-tax collections to K1.7 billion.
Economics Association of Malawi President Bertha Chikadza the situation reflects desperation due to overreliance on donor support.
“This has been a perpetual problem. From 2017 to this year (2024), development partners or donors have been financing over 80 percent of our development budget, leaving less than 20 percent to be financed by the government of Malawi,” Chikadza noted.
In the 2024/-25 National Budget, pegged at K5.99 trillion, the development budget was pegged at 30 percent, an equivalent of K1.77 trillion, of which K1.39 trillion is for foreign financed projects and K383.6 billion is for domestic financed projects.
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“This is very detrimental to the country’s development and it is not surprising that the country is very slow in implementing development projects, because this shows that we do not have money of our own to fund our own development,” Chikadza added.
Chikadza then proposed a reallocation of funds towards development by reducing recurrent expenditure.
Despite the overall decline in government expenditures, recurrent expenditures increased by K346.6 billion to K1.2 trillion in the quarter under review, which Chikadza said was predictable given Malawi’s current macroeconomic conditions.
“With high inflation, high interest rates, exchange rate challenges, and food insecurity, it is very likely that recurrent expenditure is going to go up, especially since interest rates rose up and the government has to pay back high interest on the loans it acquired,” Chikadza explained
National Planning Commission Public Relations and Communications Manager Thom Khanje acknowledged the reduction in the development budget and its impact on both short-term and long-term national development plans.
However, he expressed optimism regarding Malawi’s potential to finance its development goals under the Agenda 2063.
“By focusing on wealth creation and self-reliance, we aim to build a strong productive sector. We are on track to attract investments, particularly in mining, and remain optimistic about achieving our Malawi 2063 aspirations,” Khanje stated.
