Curbing excessive spending through strict controls and redirecting funds to social services and poverty alleviation schemes are the centrepiece of Malawi’s efforts to woo donors into supporting its 2004/05 budget.
Malawi’s Minister of Finance, Goodall Gondwe, unveiled an 85,6-billion kwacha budget in Lilongwe with a warning to government departments that they adhere to his new expenditure control measures.
”This is a very bitter budget and it will even mean cutting some jobs within the civil service,” he said.
The government will review the Very Very Important Personal Allowances law, which benefits ministers and government officials, and the Procurement Act, which creates committees to deal with tenders in each ministry. This comes in the wake of several government officials being investigated and at least one sentenced for corruption and abuse of tender procedures.
The government’s fleet of vehicles will also be cut by half.
Gondwe, a former International Monetary Fund (IMF) employee and African Development Bank president, allocated 11-billion kwacha, or 12,3%, to education and eight billion kwacha, or 9,3%, to health, with mining and the environment also getting sizeable allocations. The salaries of civil servants have been increased from 2 720 to 4 500 kwacha a month.
Rural development is seen as key to reducing poverty. Access to land, input fertiliser, improved road networks, electricity and infrastructure such as telephones will get priority. Gondwe announced a 2,5-billion kwacha fertiliser subsidy through which two million families would benefit from free 25kg starter packs.
Oxfam Malawi country programme manager Nellie Nyangwa welcomed the government’s decision to subsidise fertilizer. ”A targeted fertilizer subsidy scheme is the best way forward for Malawi. The only challenge is to ensure that the scheme is sustained and benefits the genuine poor.”
The 2004/05 budget represents an increase of 8,5% on last year. Interest rate cuts have been mooted as one way of stimulating economic growth.
Gondwe said the government was not in a position to reduce tax revenue. He said the tax structure would be reviewed and brought in line with that of Malawi’s neighbours.
The finance minister expressed the hope that donors would resume their support for Malawi to alleviate debt — accumulated interest amounts to 19,7-billion kwacha — associated with borrowing locally.
The IMF cut aid to Malawi three years ago because of corruption and overspending.
The British High Commission in Malawi said the new government must avoid the pitfalls of the previous administration and manage its finances responsibly if it wants international donor help with its current economic crisis.