Goodall Gondwe reduces budget by K20 billion


Minister of Finance, Economic Planning and Development Goodall Gondwe has presented a mid-year budget statement, which shows that the fiscal blueprint has been revised downwards from K1.1492 trillion to K1.129 trillion.

In the statement delivered in Parliament on Friday, Gondwe said government is proposing the revision of the 2016/17 budget on the basis of the budgetary performance of the first half for the financial year, and the needed fiscal adjustments in response to the loss in budget support.

“It should be noted, Mr Speaker, Sir, that the downward revision in total expenditure from K1,149.2 billion to K1,129.4 billion is due to an expected decrease in disbursements of foreign financed projects.


“This reduction in overall expenditure would have been larger were it not for the increase in interest payments…,” Gondwe said.

According to the Finance Minister, domestic revenue amounted to K400.2 billion against a target of K378 billion.

He said the improvements in domestic revenues are largely due to the improved efficiency of the Malawi Revenue Authority.


“But they also point to a surge in the economy that increased the tax base. Moreover, some significant tax reforms that accompanied the 2016/17 budget are believed to have contributed to this result,” Gondwe said.

He, however, said non-tax revenue underperformed by K5.2 billion against a target of K34.0 billion.

Gondwe also told the House that both designated and project grants were “disappointingly low.”

He disclosed that only K30 billion was received against a target of K103.3 billion, reflecting an underperformance of K73 billion or 71 percent.

“This is attributed to large shortfalls in disbursement of dedicated and project grant emanating from low rates of disbursement as well as a slow pace in project implementation by ministries. It is anticipated, however, that the shortfall can be made up for during the second half of the financial year. This has already started to occur,” he said.

He said due to the revenue and grants underperformance, budgetary expenditures also slowed down, particularly on the development account.

He said total expenditures amounted to K506.1 billion against a target of K586.2 billion while recurrent expenditure was K415 billion against a target of K442 billion.

Gondwe also highlighted that the largest under-spending within the recurrent account was the Farm Input Subsidy Programme  (Fisp), where 70 percent of the resources were not spent in the second quarter of the financial year. He said this was due to delays in the commencement of the programme.

“However, some 45 percent has been used to pay fertilizer suppliers in January alone. I would like to emphasize that, because of a remodeling of Fisp, we are unlikely to overspend on this programme as we have always done,” Gondwe said.

The Finance Minister also said wages and salaries and interest payments were overspent by 7.4 percent and 4.6 percent, respectively. He said the excess expenditure on wages and salary was due to payment of arrears to primary school teachers who were recruited in of 2015/16 financial year.

“The high payments of interest on domestic debt is likely to continue for the next three years as maturing zero coupon promissory notes are being converted into interest bearing securities and as the necessary conversions from low interest securities to high interest securities due to market dynamics are also being conducted,” he said.

He, however, said there was an improvement in the fiscal deficit that required a domestic borrowing of only K25.1 billion, against the International Monetary Fund (IMF) target of K40.1 billion.

This means Malawi is within the IMF target amount by some K15 billion. He said the IMF supported programme has continued to be track, a thing which has apparently resulted to an increasing perceptible improvement in public finance management in a majority of ministries.

Gondwe also said in the midterm budget, government proposes to increase the Auditor General’s budgetary resource to enable outsourcing the forensic audit of the remaining K236 billion for the period of 2009-2014 accounts.

He said total revenue and grants is now projected at K999.2 billion against the budgeted figure of K978.0 billion, representing an increase of 2.2 percent.

According to Gondwe, Domestic revenue has been revised upwards from K783.3 billion to K840.5 billion, an increase of K57.2 billion or 7.3 percent.

“Tax revenue is revised upwards by K46.1 billion (6.5 percent), from K708.8 billion to K754.9 billion, based on actual tax performance during the first half for the financial year. Non-tax revenue has also been revised upwards from K74.5 billion to K85.6 billion, an increase of 14.9 percent due a higher than originally anticipated dividend from the Reserve Bank of Malawi.

“Grants from donors, on the other hand, have been revised downwards from K197.4 billion to K158.7 billion. This is mainly due to lower than anticipated disbursements in project and dedicated grants,” he said.

The Finance Minister also said expenditure on domestically funded projects has been revised upwards by 10.7 percent, from K38.6 billion to K42.7 billion, to finance the commencement of the construction of the Mombera University, some roads in the three cities, and stadiums in Ntcheu and Zomba.

He said due to the revisions in revenues and expenditures, the estimated fiscal deficit including grants has been adjusted downwards from K171.2 billion (4.0 percent of GDP) to K130.3 billion (3.0 percent of GDP).

‘Product of poor planning’

In reaction, the main opposition parties in Parliament, Malawi Congress Party (MCP) and People’s Party (PP) have described the mid-term budget as a desperate plan emanating from poor economic planners.

The two parties have said government makes unrealistic projections regarding the budget and the plan will be still be difficult to implement.

MCP spokesperson on finance, Alexander Kusamba Dzonzi, has said the K20 billion reduction of the 2016/2017 budget is nothing but a sign of the availability of lazy and poor budget planners at the Capital Hill.

“We have planners who are failing to properly draft a budget that truly reflects the situation on the ground. The minister should have been coming here with the budget that will not need changes anyhow. A country which keeps on changing its budget cannot even attract outside support,” Dzonzi said.

He said when the minister presented a K1.149 trillion in June 2016, the opposition parties already said the budget was not realistic but government insisted it was not too much for the country.

“We even expected more than a K20 billion reduction because when the economy is contracting, the tax base also contracts. At the end of the day the reduction may be K50 or K100 billion and we know the minister will be here again in June to tell us that the reduction was more than what he is telling us today,” he said.

PP spokesperson on finance, Ralph Jooma, said it is surprising that instead of narrating the performance of the past six months, Gondwe, spent time on projections.

“This is mid-year budget review and we are supposed to know how the budget has been implemented but instead of focusing on that the minister concentrated on projections and not telling us the sectors that have suffered due to lack of funding. We are talking about review, he is talking about projections,” Jooma said.

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