The African Development Bank (AfDB) has approved $23 million (about K40 billion) direct budget support for Malawi for this financial year.
Both Minister of Finance Simplex Chithyola Banda and Secretary to the Treasury Betchani Tcheleni confirmed the development.
“This is an indication that the economic reforms are now paying dividends. The comming in of the support will narrow the budget deficit and we will implement the budget effectively,” Chithyola Banda said.
The support comes after other development partners including the European Union hinted at resuming direct budget support to Malawi after years of drought.
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This follows the approval of the International Monetary Fund (IMFs) four-year $174 million Extended Credit Facility (ECF) programme last November.
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Speaking when presenting the 2024- 25 national budget to Parliament earlier, Chithyola Banda hinted at continued inflow of direct budget support this year.
“The ECF has unlocked financial resources from development partners such as the World Bank, the European Union, and the African Development Bank.
“Overall, the ECF will support the government’s macroeconomic adjustment and reform agenda to restore macroeconomic stability and build an 11 foundation for inclusive and sustainable growth,” Chithyola Banda said.
He said the government will continue to monitor macroeconomic developments to ensure the IMF programme remains on track.
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An ECF arrangement brings about financial assistance to countries, like Malawi, with a volatile balance of payments (BoP) position—a record of all transactions by a country and the rest of the world. It helps mitigate foreign exchange scarcity on the market.
The arrangement is also touted for its “signalling effect” of triggering direct budget support and restoring dornor-confidence.
The IMF-supported programme came to a halt in 2020 when the Tonse Alliance-led administration requested a new four-year ECF programme ‘that would be better aligned with Malawi’s long-term development strategy, Malawi 2063.’
Speaking in an interview yesterday, Economic Association of Malawi acting President Bertha Chikadza said the forthcoming of the direct budget support would eases fiscus and monetary pressure the country has faced lately.
“Any assistance, no matter how small it might be, will ease the fiscal pressure. In addition, on the monetary side, we know the money is coming in dollars and it means foreign exchange inflow. This is good development,” she said.
She, however, challenged the Treasury to ensure prudence in in public finance management to sustain dornor confidence and trust.
Of the K5.98 trillion 2024-25 budget, grants are estimated at K1.17 trillion, of which K1.10 trillion will come from international organisations and K72.69 billion from foreign governments.
Total expenditure for the 2024-2025 fiscal year is programmed at K5.98 trillion, representing 31.9 percent of GDP.
Of the total expenditure, recurrent expenses are estimated at K4.21 trillion, representing 22.5 percent of gross domestic product and 70.4 percent of total expenditure.
Development expenditure is estimated at K1.77 trillion, of which K1.39 trillion is for foreign financed projects and K383.6 billion is for domestic financed projects.
