A consortium of the Economics Association of Malawi (ECAMA), Oxfam in Malawi, and the Lilongwe University of Agriculture and Natural Resources (LUANAR), organized a budget analysis workshop on 4th March 2021 at Sunbird Lilongwe Hotel, following the presentation of the Mid-term estimates on the Recurrent and Development Accounts of the 2020/221 financial year (FY) national budget by the Minister of Finance on 24th February 2021.
The workshop was organized as part of the activities of the European Union (EU) funded project; “Enhanced Evidence-based Research to inform policy decision making in Public Finance Management (PFM)”.
The workshop aimed to provide a forum for economists, the private sector and all interested parties to publicly analyse the mid-year progress of the budget and to isolate key takeaways from the progress so far. Specifically, the analysis looked at revenue and expenditure performance of the budget; deficit and financing; PFM issues raised in the budget; the overall fiscal sustainability of the budget for the remaining half of the year; as well as risks facing the second half of the budget year.
The main presentation was done by Mr Donasius Pathera which was followed by a panel discussion. Dr Hannock Kumwenda in collaboration with Mr Lovemore Nyongo moderated the discussion. Panelists included Mr Arnold Palamuleni, Principal Economist in the Economic Policy and Research department at the Reserve Bank of Malawi; Dr Joseph Upile Matola, Principal Economist at the Ministry of Economic Planning and Economic Development; Ms Marrieta Mpingasa Kavalo, Senior Economist in the Economic Policy and Research department at the Reserve Bank of Malawi; and Mr Mathias Kafunda, Governance Programme Manager at Oxfam in Malawi.
With reference to PFM, participants noted that the 2020/21FY budget was formulated to achieve sustainable and inclusive economic growth, macroeconomic stability, and sound financial management. However, the current budget deficit is estimated at 8.8 per cent GDP against a target of less than 3.0 per cent - this means that the budget has fallen short of fiscal consolidation efforts.
It was also observed that the widening fiscal deficit mirrors limiting economic times due to the on-going COVID-19 pandemic. However, there is need for fiscal discipline to still prevail even amidst the pandemic. Thus, all public finance management principles surrounding budget implementation and execution should be adhered to.
Increased domestic borrowing (as a source of revenue) was seen as likely to cause interest rates to remain elevated and consequently weigh down on investment. This would in turn counter the government's efforts of stimulating job creation. Given this, members suggested that there is a need for government to diversify its revenue options e.g., Government could resort to concessional loans and grants.