… Says budget cuts inevitable
Malawi’s Minister of Finance Joseph Mwanamvekha on Friday presented a K2 trillion 2020/21 budget but warned that government will face challenges in revenue mobilisation due to the Covid-19 pandemic hence budget cuts are inevitable.
The total expenditure for 2020/2021 fiscal year which is projected at K2.023 trillion, represents 28.3 percent of GDP and an increase of 9.9 percent over the 2019/2020 mid-year revised estimate.
Out of this amount, recurrent expenses are estimated at K1.506 trillion, representing 74.4 percent of the total expenditure while development expenditure is programed at K517.7 billion, representing 7.2 percent of GDP and 25.6 percent of total expenditure.
The budget, according to the minister, will be financed through revenues and grants for the 2020/2021 fiscal year are estimated at K1.372 trillion.
“Domestic revenues are estimated at K1.215 trillion. Of this amount, tax revenues are estimated at K1.152 trillion, representing 16.1 percent of GDP while other revenues have been estimated at K63.2 billion. Madam Speaker, these revenue projections are conservative considering the indeterminate effect of the coronavirus pandemic.
“Grants are estimated at K156.9 billion, representing 2.2 percent of GDP. This will comprise K26.5 billion from foreign Governments and K130.5 billion from international organizations in form of dedicated and project grants,” the minister said.
He also told the House that there is an estimated deficit of K651.5 billion which will be financed by foreign borrowing amounting to K161.5 billion and domestic borrowing amounting to K490.0 billion.
He noted that for the deficit to be reduced, further cuts in the budget would be required but this is constrained by the mandatory nature of most budget lines such as wages and salaries and public debt service which are estimated at K1.110 trillion.
On sector allocations, Mwanamvekha said the Education and Skills Development Sector has been allocated the largest portion of the budget amounting to K387.9 billion, which is 5.4 percent of GDP and representing 19.2 percent of the total budget.
The Health Sector ranks second with a projected allocation of K195.3 billion, representing 9.7 percent of the total budget.
The Agriculture, Water Development and Climate Change Sector ranks third with an allocation of K194.9 billion, representing 9.6 percent of the total budget. The Ministry of Agriculture and Food Security has been allocated K99.9 billion in the 2020/2021 fiscal year.
“Out of this amount, K48.8 billion is earmarked for Other Recurrent Transactions which include Maize Purchases, Farm Input Subsidy Program and Fall Army Worm mitigation, among others. About K45.1 billion is earmarked for development projects,” said Mwanamvekha.
A total of K174.6 billion has been allocated to the Transport and ICT Infrastructure Sector while the Energy, Industry and Tourism sector has been allocated K61.4 billion.
Mwanamvekha, however, warned that government will face further challenges in its revenue mobilisation efforts due to the Covid-19 pandemic and the political impasse which will make it much more difficult to finance the budget during the 2020/2021 fiscal year.
He said: “Therefore, budget funding will be dependent upon availability of resources. Should it become necessary, cuts to the recurrent and development budget lines will be inevitable.”