Minister of Finance Sosten Gwengwe is today expected to deliver to Parliament the 2022- 23 mid-year budget statement as the financial plan seems to have almost gone rogue.
Most parameters anchoring the budget are seen losing shape.
This year’s K2.8 trillion national budget was planned with a glaring K884.04 billion deficit or an equivalent of 7.7 percent of gross domestic product, of which K653.98 billion was meant to be covered through domestic borrowing.
The annual financial plan, whose implementation period commenced in April 2022, was anchored on assumptions that the real GDP will grow by 4.1 percent in 2022 and 4.0 percent in 2023, inflation rate will average 9.1 percent during the fiscal year, and that the policy rate will be at 12 percent, among others. But all these targets have been missed.
Instead, the economic growth has been revised downwards to 1.7 percent; average inflation has been adjusted to 23.2 percent while policy rate—the rate at which commercial banks use when borrowing from the central bank as lender of last resort— is now at 14 percent since May.
Also, there have been glaring disparities between revenue and expenditure over the first months of the financial calendar.
For example, during first month of the financial year in April, Treasury reported a K127 billion deficit, which, however, went down to K91.1 billion in May, further down to K74 billion in June, and to K53.3 billion in July and then to K44.8 billion in August.
In an interview Thursday, Economics Association of Malawi Executive Director Frank Chikuta said one key re-alignment of the budget would be balancing between expenditure and revenue generation.
“The budget should look at where the expenditures can be rationalised and look at areas where revenue collection can be enhanced to make sure that the programmed deficit is maintained,” he said.
Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said, due to the May 2022 Kwacha devaluation and rising inflation, the budget is likely to be bloated if expenditure lines remain unchanged.
He said the budget would be maintained or reduced.
Centre for Social Concern Coordinator responsible for economic governance Bernard Mphepo is of the opinion that the first priority which the government needs to work on is reducing the cost of living by putting in measures that will arrest inflation.
“Food inflation is one of the drivers of food inflation in Malawi and we are heading for a year when we might be food insecure, a development which may drive inflation further. Therefore, the budget should critically look at that,” he said.
Speaking in Parliament Thursday, Gwengwe said financial prudence policies are on the agenda of the government.
“The budget for AIP, for example, should be within reasonable bounds and we will make sure that there is prudent financial management and that starts with our budget,” he said.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.