The International Monetary Fund (IMF) has said it expects the 2018/19 national budget to be consistent with the new Extended Credit Facility (ECF) programme.
Finance Minister, Goodall Gondwe, is tomorrow expected to get down on his knees and ask impoverished Malawians to allow him use trillions of their hard-earned taxes between July 2018 and June 2019.
Late last month, the IMF approved another three-year ECF programme for Malawi valued at $112.3 million which aims to entrench macroeconomic stability and foster higher, more inclusive and resilient growth.
IMF Malawi Resident Representative, Jack Ree, said in an interview that the fund expects Lilongwe to deploy strong remedial measures to address the widening budget deficit.
“These remedial messages should address the widening of the budget deficit in the current fiscal year and shift to a balanced budget position,” Ree said.
Malawi’s fiscal deficit was projected to widen from an estimated 3.7 percent of the Gross Domestic Product (GDP) in 2016/17 fiscal year to 4.4 percent of GDP in 2017/18 due to increased expenditure and revenue under-performance.
Ministry of Finance spokesperson, Davis Sado, hinted that the budget would be a balanced financial plan which will take into consideration a number of factors considering the aspirations of the people and the outcomes emerging from budget consultation meetings the ministry conducted.
“It has to be noted that it will be a budget which has to encompass the forthcoming electoral processes and the Population and Housing Census. So, the budget has a balanced framework,” Sado said.
During the 2018 pre-budget consultation meetings, Secretary to the Treasury, Ben Botolo, was upbeat that, with ECF in place, Malawi’s economy would improve as such funds would be used for the intended purpose.
“Key during the next financial year (2018/19) would be fiscal and monetary policy measures and debt sustainability targets to be achieved by the end of the year,” Botolo said, adding that the next budget would be less than the current K1.3 trillion.
Investment management and advisory firm, Alliance Capital Limited, recently advised Capital Hill to be thoughtful and mindful of how it formulates its budget.
Chancellor College economics professor, Ben Kalua, has since asked Capital Hill to align its expenditure to resource availability, especially as the country enters into an elections year.
In an interview last week, Kalua said, while most governments struggle with fiscal deficits during such a period, the problem is worse for low income economies such as Malawi.
“Parliament should closely monitor the high pressure points. There is a tendency for a ruling party to go into soft belly and social services which are attractive to voters. We expect this government to succumb to the same pressure in the coming budget.
“Even if they [government] say they are watchful and mindful, we are going to have expenditure overruns into the social sectors because of the political year,” Kalua warned.
He further predicted a slowdown in revenue collection in the year which would pile increased pressure on the national budget.