* Assures Finance Minister Gwengwe when he delivered the 2023/2024 National Budget policy statement in Parliament on Thursday
* Initially, President Lazarus Chakwera had directed a deadline of December 2022 for full restoration but it was shifted to this March
* Government is taking meaningful steps to improve the reliability, security, efficiency and utilization of electricity in the country
By Duncan Mlanjira
Restoration of Kapichira Hydro Power Station — which lost all of its 130 megawatts (MW) it contributes to the national grid due to Cyclone Ana that devastated a lot of economic infrastructure mostly in the Lower Shire Valley — is on course as 50MW will be added back to the grid by this month end of March.
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This was assured by Minister of Finance & Economic Affairs, Sosten Gwengwe on Thursday in Parliament when he delivered the 2023/2024 National Budget policy statement.
Initially, President Lazarus Chakwera had directed a deadline of December 2022 for full restoration but it was shifted to this March and Gwengwe also reported that “the Government is taking meaningful steps to improve the reliability, security, efficiency and utilization of electricity in the country”.
This include completion of 19.1 MW Tedzani IV Hydro Power project and that as of January, 19,473 customers were connected to the grid using Electricity Supply Corporation of Malawi (ESCOM) resources through the Electricity Access project.
“In addition, a Fund Manager was appointed to disburse loans for the rollout of solar home systems to 200,000 off-grid customers in June 2022 and the development of 75kW Chipopoma mini-grid’s hydro power plant at Mantchewe area of Livingstonia in Rumphi District, which will go a long way in transforming the lives of the people within and around the area has also been completed.”
He also reported that Government will continue implementing impactful projects under the energy sector, that include: Mpatamanga Hydro Power project; Malawi-Mozambique Inter-connector project; Malawi Electricity Access project and extension of Wovwe Hydro Power Plant.
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The Minister said the main focus of the 2023/2024 fiscal plan is to progressively continue containing the budget deficit, saying it “continues to address issues of public debt management; fiscal consolidation; ensuring prudent and efficient use of public resources to achieve value for money; export diversification and import substitution; strengthening the balance of payment position as well as promoting local manufacturing”
It has been formulated with the following underlying assumptions:
i. The real GDP growth of 2.7% in 2023 and 3.2% in 2024, giving a fiscalized GDP growth rate of 2.8%;
ii. Average inflation rate of 17.9% during the fiscal year;
iii. A policy rate of 18; and
iv. Tax refunds of 3.0% of the total tax collection.
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Total Revenues and Grants
These are estimated at K2.55 trillion representing 16.8% of GDP with domestic revenue is estimated at K2.24 trillion representing 14.7% of GDP.
Of the domestic revenue, tax revenue is estimated at K2.13 trillion while other revenue is estimated at K114.34 billion while Grants are estimated at K311.5 billion, representing 2.0% of GDP.
Grants comprise K299.07 billion from international organization and K12.43 billion from foreign governments in form of dedicated and project grants.
Total Expenditure
It is projected at K3.87 trillion, representing 25.5% of GDP. Of the total expenditure, recurrent expenses are estimated at K2.98 trillion (19.6% of GDP) and 76.9% of the total expenditure, respectively.
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Development expenditure is at K896.21 billion, (5.9% of GDP and 23.1% of total expenditure). This represents an increase of K207.75 billion from a projected 2022/2023 likely outturn of K688.45 billion while development expenditure is composed of K600.28 billion foreign resources and K295.93 billion domestic resources.
On overall fiscal balance and financing, Gwengwe said it is estimated at a deficit of K1.32 trillion (8.7% of GDP, an improvement of 0.01% from last year’s 8.8% likely out turn).
He added that “government continues to ensure that the fiscal deficit is minimized to the extent possible. This deficit will be financed through foreign borrowing amounting to K288.78 billion and domestic borrowing amounting to K1.19 trillion.”
Interest Payments
It has been estimated at K914.86 billion, representing 6.0 of GDP, which is an increase of K269.66 billion, from K645.20 billion for 2022/2023 financial year’s revised provision.
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“This increase is partly on account of the impact of devaluation of the Malawi Kwacha against the major foreign currencies and huge maturities of promissory notes used to clear arrears.
“Of the total resources earmarked for interest payments, K35.87 billion is for foreign interest payment while K878.99 billion is domestic interest payment.”
On grants to other general government units, they are estimated at K297.34 billion whose key breakdown includes: transfers to Roads Fund Administration at K67.45 billion; to Malawi Revenue Authority at K62.76 billion; K146.14 billion for subvented organisations; K16.00 billion for University students’ loans and K5.00 billion to Roads Authority.
Budget Performance
The likely outturn for total expenditure for the 2022/2023 fiscal year is estimated at K3.04 trillion (26.7% GDP) — comprising K2.35 trillion of recurrent expenditure and K688.45 billion development expenditure.
The estimated recurrent expenditure comprises the following major expenditure lines:
i. Compensation of Employees at K771.16 billion;
ii. Interest Payment at K645.20 billion;
iii. Generic Goods and Services at K254.95 billion;
iv. Grants to Other General Government Units at K245.74 billion;
v. Affordable Input Programme at K140.27 billion; and
vi. Pensions and Gratuities at K115.75 billion.
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Budget Support
Building on the on-going discussions with the International Monetary Fund (IMF), Gwengwe reported that the Government is also engaging the World Bank and the European Union for possible budget support.
“Among others, the World Bank has committed about US$160 million, approximately MK164.8 billion for a Development Policy Operation budget support while the EU will announce its committed amount as discussions continue.
“This shows that the current Administration is regaining the trust/donor confidence in its systems, especially public finance management, including the fight against corruption and other Public Finance Management reforms taking place.
On public finance management, he said: “It is evident that commercial state-owned enterprises (SOEs)have been registering losses, borrowing heavily from commercial banks or persistently requesting for Government bailouts to finance their operations.
“Some contingent liabilities for SOE have eventually turned into actual debt and responsibility of the Government. To address the fiscal risks posed by loss making SOEs, Government will continue to conduct fiscal risk analysis to detect potential areas of fiscal risks facing SOEs in the country.
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“Those that continue to make losses may have to be restructured or indeed closed altogether. Over 90% of SOEs have opened revenue holding accounts with RBM.
“Moving on to efforts in addressing under collection of non-tax revenue including, dividends and surpluses, Government will continue enforcing opening of revenue holding accounts at the Reserve Bank of Malawi for all commercial SOEs.
“Government will sanction those that do not comply in line with the PFM Act, 2022 by 1st of April 2023,” he reported.
