Fueling Malawi’s Growth: MPs and Experts Weigh in on Budget Reforms to Revitalize the Economy
Key Business Points
- The Malawi Economic Justice Network (Mejn) is urging for stronger budget oversight to prevent fiscal authorities from having excessive control and to reduce the risk of abuse.
- Mejn recommends limiting the Finance Minister’s freedom to borrow domestically to curb unsustainable borrowing and reduce the country’s public debt, which has ballooned to K21.6 trillion.
- The network is calling for reforms to the Public Finance Management Act (PFMA) to ensure that checks and balances are in place, and to prevent the misuse of funds.
The Malawi Economic Justice Network (Mejn) has expressed concern over the weak budget oversight in the country, which it believes is giving fiscal authorities too much control and creating room for abuse. According to Mejn Executive Director Bertha Phiri, the lack of oversight is undermining the principles of checks and balances highlighted in the Public Finance Management Act (PFMA). This has led to a significant increase in public debt, driven largely by unchecked domestic borrowing. Phiri emphasized that the current system allows the Finance Minister to present a deficit budget without any limits, enabling them to borrow domestically without restriction.
The analysis by Mejn reveals that revenue performance has been below target, while expenditure has exceeded the threshold. The poor revenue performance is attributed to low tax and non-tax revenue, as well as inconsistent donor inflows. To address this issue, Mejn is recommending that the Finance Minister be given a reasonable budget deficit limit to curb unsustainable domestic borrowing. As Phiri noted, "What happens now is that the Finance Minister is allowed to present a deficit budget and there is no limit. That allows the minister to borrow domestically without limit."
Chairperson for the Budget and Finance Committee of Parliament Sosten Gwengwe echoed Mejn’s concerns, stating that government expenditure has not been consistent with revenue levels and the economic situation. He suggested that cuts on benefits by top officials, including Cabinet ministers, members of Parliament, and top civil servants, could help address the issue. Gwengwe also emphasized the need for policies and interventions that stimulate productivity, citing "zochitika za usiku" (night-time economic activities) as an area that could be explored.
The call for stronger budget oversight and reforms to the PFMA is a critical issue for Malawi’s business community, as it has significant implications for the country’s economic growth and investment opportunities. As Mejn’s analysis highlights, the current system is "chigawenga" (a blank cheque) that is being subjected to serious abuse. By limiting the Finance Minister’s freedom to borrow domestically and introducing reasonable budget deficit limits, the government can help reduce the risk of abuse and promote a more sustainable economic environment. As Gwengwe noted, "Tikwanitsa kuziba masamba a pa bwalo" (we need to find ways to stimulate productivity), and this requires a more prudent approach to budget management.
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