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Losers, winners! Midyear Budget Review

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It is ironic that during the week that the Minister of Finance, Economic Planning and Development Goodall Gondwe presented the 2016-17 Midyear Budget Review was the same week that Ronald Mangani was dis-appointed at the ministry as the Secretary to the Treasury (ST). It was also the same week that the parliamentary committee that was investigating the Admarc maize saga accused Mangani of lying under oath and recommended that he and others should be sternly rebuked. Coincidence?

For my friend, Mangani, the Nutcracker says thank you for a job well done in the ministry. Some might not think he deserves this congratulatory remark but those who remember what people said in September 2014 when he was appointed to the ST position, will know the level of scepticism that greeted his appointment. Mangani, a lecturer at the University of Malawi’s Chancellor College in the Department of Economics at that time was said to have little practical experience having spent most of his professional life in the intellectual community.

Alas! Now some of the same people wish he could have stayed longer. In his place comes, Ben Botolo. The Nutcracker wishes Botolo all the best in his new job; he needs no advice from the Nutcracker since he is a career civil servant who has previously worked in this ministry and understands the political as well as professional undertones of this position.

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When Gondwe presented the annual budget in June 2016, he claimed that the budget had two main objectives. First was to ensure food security and second to stimulate the economic recovery that Malawi badly needed. It is my plea that when Members of Parliament debate the reviewed budget, they will keep this in mind. The minister promised the citizens of this country that to ensure that those objectives were met, the government was going to keep expenditures within the available resources and only resort to domestic borrowing within what he called “acceptable levels of borrowing”.

The estimates presented by the minster indicate that the overall budget total has been reduced by close to two percent from K1,149.2 to K1,129.4 trillion. This looks like a small reduction. However, this has massive implications on development. This is because, in general, any government budget is divided into two broad categories. The first category is recurrent expenditure, which in simple terms can be equated to consumption. The second element is called development expenditure, which loosely can be translated into investment. For any economy to grow, it needs to put most of its resources into investment and not consumption.

Unfortunately, for Malawi, the situation for a long time has been such that the budget is skewed more towards consumption. In June 2016, the minister presented a budget that allocated 72 percent of all the available resources to recurrent expenditure, leaving only 28 percent to development expenditure. Last week, the minister, in the statement presented to Parliament is proposing a revision that will see this component of the budget reduced further to 22 percent. This represents a net reduction on the development expenditure of 20 percent from the approved budget estimates.

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While the minister argued in the budget statement presented to Parliament in June 2016 that the budget was anchored on managing debt, the revised estimates do not seem to support that argument. Interest payments on public debt have shot up massively. The total provision on interest payments has increased by K25 billion. These are resources that could otherwise be used for provision of social services. This government needs to reign on borrowing. In addition, the minister is proposing a reduction to the Ministry of Agriculture budget of K49 billion while that for the Ministry of Transport will see a reduction of over K25 billion. What justification does the budget have for these proposed reductions?

It is not all gloom though, the good news is that the ministries of Health and Education has been bolstered with additional funding in the revised budget of K 6.5 billion and K 5.7 billion respectively. In percentage terms, the Green Belt Authority is also expected to gain on its original estimates by 37 percent.

Previously, this column has argued that a budget is only a tool; it is not an end. It will, therefore, be a developmental tragedy if our MPs do not debate this budget review as a tool that will aid a well-crafted plan and not an end in itself. The question that should preoccupy those legislators who care about the economic development of this country should include a focus on whether our spending patterns so far follow a plan.

What a turning point it would be if for once our Parliament realised that, in the past, debates in the House on the budgets have for all intents and purposes been only interested in budgeting with no emphasis on planning. For Malawi to develop, it is now time to ensure that we concentrate on a plan that works and then have the budget running and aiding the implementation of that plan. The last developmental plan Malawi had expired in 2016. The question then is which plan is this budget aiding?

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