Finance Minister Felix Mlusu has today announced an upward adjustment of the national budget, which has seen the 2020/21 financial plan-a maiden budget for Tonse Alliance government-increasing by a nominal value of K144 billion.
The revision has seen the value of the budget envelop rising from K2.190 trillion to K2.334 trillion.
The adjustment has been necessitated mainly by the expenditure towards fighting Covid-19 pandemic which has now taken a new virulent strain and has killed 1000 plus people since the first three cases were detected in Malawi on April 2,2020.
But the adjustment has done more harm to the fiscus than before as it has seen the budget deficit yawning further from K755 billion to K810 billion, at a time when revenue sources have faltered due to Covid-19.It is estimated that monthly revenue collected by the Malawi Revenue Authority (MRA) has shrunk by an average of 11 percent in recent months due to the pandemic.
But at K810 billion, the deficit is the highest in history in nominal terms and should be an eyesore to Mlusu who has to devise innovative measures to finance for such a gap.
Mlusu has little options, however, as he will most likely resort to expensive domestic borrowing on the market by using long term instruments called Treasury Notes, a move which has been rebuked by the World Bank as it culminating into the spiraling public debt accumulation. By December 2020, the country’s debt stock stood at K4.1 trillion or 65 percent of GDP. Out of the K4.1 trillion debt stock, 57 percent or K2.4 trillion is domestic debt which is usually discouraged as it crowds out private sector investment.
The money allocated in the mid-term budget review will cater for salary increments for health workers, procurement of the AstraZeneca Covid-19 Vaccine doses and other tasks aimed at reviving the country’s economic growth.
Mlusu said government secured the AstraZeneca vaccines through the COVAX Facility for 20 percent of the population at approximately US$ 40.0 million.
“The total requirement for this vaccine for the entire population is US$120.2 million. Government has further secured financing worth US$1.5 million and US$2.0 million from Sustainable Development Goals Acceleration Fund and the United States Government, respectively, for logistical and technical support.”
Delivering the mid-term budget review, Mlusu said the key drivers for the increase are salary increase from K523.7 billion to K525.3 billion, representing an increase of K1.6 billion which is budgeted to finance recruitment of health workers.
“Madam Speaker, the provision for wages and salaries has been revised upwards from its approved amount of K523.7 billion to K525.3 billion, representing an increase of K1.6 billion which is budgeted to finance recruitment of health workers.
“The Compensation of Employees budget line has also been adjusted upwards on account of an additional K2.5 billion to the contributory pension scheme that has been necessitated by the salary increase and new recruitment,” said Mlusu.
The minister said the allocation for provision for Goods and Services has also been revised upwards from the approved figure of K309.2 billion to K346.0 billion.
“This is on account of an increase in the unforeseen budget line of about K23.2 billion, of which K17.5 billion is towards Covid-19 pandemic management and treatment efforts and K4.5 billion is programed for re-administration of the Malawi School Certificate of Education Examinations. There has however, been a reduction in the normal ORT for most Votes reflecting the scaling down of both local and external travel as a result of the pandemic,” he added.
In the same vein, Tonse government has trimmed the budget for its flagship program, Affordable Input Program (AIP) to K142 billion from K160.2 billion as well as the number of beneficiaries from the initial 4.2 farming families to 3.7 families.