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Hon Goodall Gondwe Arrival at Parliament |
The Minister of Finance, Economic Planning and Development Honorable Goodall Gondwe has unpacked the estimates on the recurrent and development accounts for the budget of the 2015/16 financial year on Friday afternoon in the National Assembly.
Now, the budget has been referred to the committees of Parliament for two week scrutiny before they are considered by the Committee of the Whole vote by vote, and that, thereafter, they be adopted.
Gondwe announced that the total expenditure and net lending in the 2015/16 budget is projected at K901.6 billion “Although this appears to be higher in money terms than the 2014/15 revised total expenditure of K800.7 billion, it is actually lower in real terms." He said
The 2015/16 budget constitutes 26.2 percent of GDP, while the revised budget for 2014/15 accounts for 28.4 percent of GDP.
The recurrent expenditure will be K674.6 billion, while development expenditure will amount to K224.0 billion. Therefore, the share of goods and services that will accrue to the public sector is projected to be lower in 2015/16 than that consumed in 2014/15 Said Gondwe
When making his presentation, Hon Gondwe acknowledged uncertainty of receiving budgetary support from bilateral donors though Malawi is sealing loopholes that led to theft of public money dubbed cashgate.
He did not even hide to mention that the budget has not only seen a decline in donor budgetary support, but dedicated and project grants as well.
The Finance Minister however, told the House that more support from donors to Government ministries, departments and agencies shall largely be through off-budget a development which will see votes, particularly those in the social sector, appear underfunded, but may actually be adequately funded when off-budget donor support is added to the budgetary allocation.
But he noted that upward trend in off-budget support as a major source of financing the delivery of public goods and services is not without problems. In particular, he said this development means that the Government (including Parliament) does not have decision making responsibility over an increasing amount of resources available to the public. Therefore, the Government cannot properly decide on expenditure priorities, nor properly plan and time the delivery of goods and services in some critical areas.
But Gondwe said Malawi hold the strong view that greater coordination between the Government and the donors will go far in relieving some pressure on the budget itself, and sustaining the impact of donor support.
Currently, African development Bank resume its budgetary support during the 2014/15 financial year but Malawi government remain hopeful that the other two multilateral institutions, World Bank and the European union, will shortly decide to join the African development Bank.
Outlook of 2015/2016 Budget
Since this year’s budget is premised on no budgetary support, Malawi has strategized to generate adequate local resources to finance activities. Consequently, Gondwe said government has developed the tax measures that will concentrate on improving administrative efficiency, encouraging tax compliance, and broadening the tax base in order to generate more domestic resources.
The finance Minister indicated that the design of this year’s budget is characteristically reflective of the diminishing size of the resource envelope available to the Government, as a percentage of GDP (hence, potentially, in real terms), against the pressure of growing needs to provide critical public goods and services.
He indicated that the draft budget assumes an optimistic macroeconomic outlook for the next financial year. Inflation rate is projected to decline to 16.4 percent, a general decline in interest rates while economy will register a higher real growth rate of about 7.0 percent.
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Gondwe being led onto the chamber by Sergeant at
Arms |
Hon Gondwe also said the assumed nominal value of GDP for the 2015/16 Financial Year is K3.4 trillion.
Gondwe said, total revenue and grants are projected at K763.5 billion (22.2%of GDP) which is lower share of GDP than the revised figure for 2014/15 of K683.3 billion, which represented 24.2% of GDP. He said this decline in total revenue and grants as a share of GDP is entirely due to the continued decrease in donor grants, which amounted to K132.8 billion in 2014/15, but are projected to decline to K97.1 billion in 2015/16.
He even mentioned that project grants, which remained buoyant in the past, are projected to decline from K71.5 billionin in 2014/15 to K52.9 billion in 2015/16. Moreover, he said dedicated grants are projected to decline by about K10.6 billion relative to the 2014/15 revised figure of K47.6 billion.
He said tax revenues are projected to rise from K581.0 billion in 2014/15 to K592.4 billion, as the Malawi revenue Authority (MrA) sets out to strengthen the tax administration regime, and as the economy bounces back from subdued growth.
The Minister said the recurrent expenditure allocation, however, it is proposed to increase wages and salaries by an amount that will raise the salaries of the junior grades in the public service. The budget also provides for the recruitment of some 10,500 primary school teachers and 466 secondary school teachers, who are projected to join the civil service during the last quarter of the financial year. These initiatives as well as an annual wage creep scheduled for implementation in December 2016 will raise the wage bill from K198.0 billion in 2014/15 to an estimated K228.7 billion.
Development expenditure, which was revised to K189.2 billion in K2014/15, is projected to rise to K224.0 billion in 2015/16. Some K173.0 billion of this amount will be funded by external resources (development Part I), while K50.0 billion will be funded using domestic resources (development Part II).
For the first time, an amount of K5 billion or 10 percent of the domestically financed development expenditure, is being set aside for rural development in the district councils. Therefore, together with resources for the local development fund (ldf) and the Constituency development fund (Cdf), local authorities will have command over K30 billion this year, for grassroot development projects.
In addition, the draft budget has provided the sum of K6.5 billion for maintenance and rehabilitation of roads within four cities. Of this amount, the cities of Blantyre and Lilongwe have each been allocated the sum of K2.0 billion, while Mzuzu will receive K1.5 billion, and Zomba will receive K1.0 billion.
Direct allocations to key line ministries
The amount of K133.7 billion has been allocated to the Ministry of Agriculture, Irrigation and Water development; K109.8 billion to the Ministry of Education, Science and technology; and K77.4 billion to the Ministry of Health. However, through off-budget donor resources, Ministry of Health will also receive about K55.6 billion, making a total of K123.0 billion. Similarly, the Ministry of Gender has a total budgetary allocation of K3.2 billion, and will receive off-budget donor funding amounting to K14.4 billion.
The proposed budget has a planned overall deficit of 4.0 percent of GDP, against 4.2 percent in 2014/15. Below the line, planned domestic borrowing is projected at K25.0 billion, or 0.7 percent of GDP. This compares favourably with the corresponding figures for 2014/15 of K36.8 billion, which is 1.5 percent of GDP. Building on the trend in 2014/15 already described, it is planned to reduce the domestic debt stock further from 15.9 percent to 14.5 percent of GDP in 2015/16. Thus, Malawi could be reaching the internationally accepted ratio of 12.5 percent quite soon.