Malawi economic crisis: Govt lowers budget

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Goodall Gondwe and Peter Mutharika

The withdrawal of donors has caused pain for Malawi as government has been forced to adjust the budget downwards due to a decrease in local revenue collection.

Presenting the midterm budget statement in Parliament on Friday, finance minister Goodall Gondwe proposed that Members of Parliament should approve an adjusted budget since government did not meet its revenue collection targets.

In June last year, Parliament approved a K927.9 billion budget which was to be locally financed but Gondwe on Friday proposed that it should be reduced by K23.7 billion so that it should now be  K906 billion due to under-collection of revenue.

Goodall Gondwe and Peter Mutharika
What should we do? Gondwe seems as asking Malawi President, Peter Mutharika. (Library).

He said total revenue and grants that were targeted at K386.1 billion at the end of the first half of the 2015/16 financial year were under-collected by K50.8 billion while domestic revenues that were targeted at K312.4 billion fell short by K12.7 billion down to K299.7 billion.

According to Gondwe, some taxes performed well but the VAT underperformed considerably by an amount of K5.6 billion. He added that grants performed even worse where the target of K75.3 billion was underperformed by K36.5 billion, less than half the targeted amount.

Gondwe however urged the parliamentarians to help government in exploring more ways of increasing local revenue collection so that the country should become progressively, more self-sufficient in budgetary matters than has been the case so far.

“There is therefore need to strengthen our effort at raising domestic revenues and to downplay all donor grants in general and only expect to focus more on development loans from donors as a reliable mode of donor aid delivery,” said Gondwe.

The minister of finance also insisted that the budget is not zero-aid since government “will expect a sizable amount of dedicated and project grants.”

He said “bilateral donors only formally withdrew from budgetary support (programme grants)” but the donors including multilateral institutions “are increasing their off budget support massively.”