Malawi government must really reduce spending
President Peter Mutharika and Minister of Finance Goodall Gondwe have a responsibility of ensuring that there is no careless spending and borrowing in government as ordinary Malawians are feeling the pinch of the economic turmoil in the country The economic problems prevailing in the country, could get even much worse if business will continue as usual at Capital Hill where ministries and departments are reportedly spending even beyond their budgets.
So bad is the situation that the government is now borrowing heavily from banks to finance recurrent expenditure.
The problem with heavy domestic borrowing by the government is that it has ripple effects that would definitely create more problems for the entire economy if it continues unchecked.
Apart from creating debts for the government and tax payers, domestic borrowing is like printed money, so much so that it is also inflationary as it pumps into the system valueless cash not backed by goods or services.
Such money can also fuel depreciation of the local currency as it provides resources that could increase demand for foreign currency taking into account Malawians’ habit of importing luxurious goods when ever they have money.
Government borrowing from local banks also overcrowds the private sector on the financial market and causes lending rates to go up as banks prioritises treasury bills in the business where they take advantage of the huge government appetite for resources to charge exorbitant interest rates which the private sector cannot afford.
Spending within budget is therefore very crucial if the government is to keep control of the macro-economic situation and minimise the suffering among ordinary people from the hostile economic environment in the country.
It is also important in the maintenance of donor and investor confidence in the Malawi economy. With the International Monetary Fund (IMF) mission team in the country, maintenance of fiscal discipline will be key in ensuring that Malawi remains on track in its programme with the IMF.
So even with the resource constraints the government is facing, uncontrolled expenditure and domestic borrowing is suicidal and is one thing President Mutharika should not allow to happen at any cost under his watch.
He simply has to make sure that fiscal discipline prevails by finding practical ways of ensuring that spending is always within budget.
And the president has to be firm on this issue. If I were him, I would have sat down with my cabinet and principal secretaries to come up clear measures of cutting expenditure in all government operations without, of course, compromising on social and essential services to the people.
One area where government can achieve heavy savings is on government vehicles. The fuel costs incurred by government officials and departments are so heavy that they drains out huge resources from the budget.
Efficient management of the government fleet as well as usage of fuel could go a long away in reducing expenditure in many government operations. That should not be difficult if the government is willing to adopt change since there are now practical models which have proven effective in some private companies from where the government can learn from.
For a start, President Mutharika can start by simply ordering a 50 percent cut in all fuel allocations to ministers, members of Parliament, High Court and Supreme Court judges, principal secretaries, directors, district commissioners, director generals and all other officials on the payroll of the tax payer.
It is immoral, unreasonable, insensitive and selfish for one government official to be enjoying a fuel allocation of 500 litres a month when ambulances are parked at hospitals due to lack of resources for the purchase of fuel.
Secondly, government must explore vehicle ownership schemes for such officials instead of continued use of government vehicle for personal use.
The government can achieve huge savings in vehicle maintenance if senior government officials were assisted to get loans from banks for the purchase of own vehicles. All the government would have to do is to provide them with a monthly allocation for fuel and maintenance at standard rates as those used in the private sector.
And there are so many ways through which costs cuts can be made in the government system without reducing the provision of services to the public. The point is that there is need for fiscal discipline in government is macro-economic stability is to be achieved again in this country.
It simply does not make sense to be hearing of over-spending and heavy borrowing in government at the time sacrifices are being demanded from everyone for the sake of economic recovery. #ThumbsDown to the government.
A vibrant writer who gives a great insight on hot topics and issues