‘MCP-led Government’s rocketing fiscal expenditure patterns is a major concern for the Malawi economy’—AFORD national director for economic affairs Chifipa Mhango

* The Government has already spent MK4.1 trillion in the first nine months of 2024 to September 2024

* Surpassing the year 2023 by MK732.7 billion, of which only 24.7% is towards development projects

By Duncan Mlanjira

The Malawi Congress Party (MCP)-led Government’s “rocketing fiscal expenditure patterns is a major concern for the Malawi economy, as less is being diverted towards development-oriented objectives” — says Don Consultancy Group (DCG) Chief Economist, who is the Alliance for Democracy (AFORD) national director for economic affairs.

The media statement — copied to Ministers of Finance & Economic Affairs and Information & Digitisation — adds that it is “very concerning to note that the MCP Government has already spent MK4.1 trillion in the first nine months of 2024 to September 2024, surpassing the year 2023 by MK732.7 billion, of which only 24.7% is towards development projects”.

He quotes latest data gathered through the Reserve Bank of Malawi (RBM), which he says “paints a further disturbing picture of the inability to effectively manage the fiscal position of the country as well as more appetite towards borrowing”.

“At a spending of MK4.1 trillion, in the first nine months of year 2024, almost 75.3% — a percentage even higher than the first eight months by 0.2% — has been through administrative expenditure (travel, salaries, allowances etc); totalling MK3.1 trillion, an amount which is equal to the total fiscal expenditure of the whole 2023 calendar year.

“This is not a good reflection of a Government that is serious towards austerity measures at all, ” observed the AFORD national director of economic affairs, while warning that the government debt is at over 81% share of the country’s GDP, and at the rate that debt is being accumulated by, projections point closer to 90% share Debt of GDP by September 2025, “if this situation is not managed”.

He thus turns to AFORD’s position on Malawi’s fiscal policy, saying it is set “to contain costs and taking an effective approach towards cost management through a monthly strict monitoring of Government expenditure, on each accounting line or row”.

“Our approach and advocacy towards fiscal reform is guided by the needs of the Malawi economy, to which fiscal expenditure reflects a development-oriented pattern, which will be informed through an advanced drafted economic policy section of our Manifesto.

“The MCP-led Malawi Government’s budget deficit in these first nine months of 2024 has increasingly surpassed the total of 2023, reaching MK918.8 billion. No Government can continue to spend what is has not earned through tax revenue system in a reckless manner, as it reflects, that even the purpose of its debt is for consumption, in an environment where the domestic economy has only grown by 2.1% on average in the last four years, thus restricting the revenue base growth.

“It is very concerning that it is the poor Malawian masses that are bearing the burden of a mismanagement of the economy, which has seen the cost of living escalating to levels not seen before, as inflation rate seems to be heading to levels of above 35%, with Malawi ranked third highest in Africa currently, after South Sudan (107% and Zimbabwe (57.5%).”

Mhango continues to hold the view that “Malawi is an import consuming economy as reflected in the international trade dynamics, with the RBM latest data reporting a worsening trade deficit position (ie importing more in value terms than the country exports) of MK338 billion in September 2024 from the MK228 billion recorded in August 2024.

“This further supports the view that devaluation of the Malawi Kwacha has never supported to transform the Malawi’s economy international trade position but rather to influence foreign currency demand, considering that the current September 2024 international trade deficit is worse since September 2023, when it was MK203 billion.

“This poor economic state of Malawi international trade has thus limited the potential growth of the country’s total foreign exchange reserves, thus struggling to even reach levels above MK1 trillion on average monthly, in the first nine months of 2024, as data reported by RBM indicate.

“The country’s total foreign exchange reserve position as of September 2024 is MK980.8 billion, thus a slight improvement of MK39.4 billion attributed to private sector accumulation. This is unsustainable for the Malawi economy to absorb external shocks caused by global economic and geo-political factors.

“The country’s import cover position remains unchanged from the August 2024 to the latest data month of September 2024, at 0.5 month or 15 days, thus limiting the country from sustaining the monthly importation of two of its top import products such as fuel and fertilizer.”

In his conclusion, the AFORD national director for economic affairs said: “The results of a poorly managed economy and lack of coherent economic policies, in fiscal policy, trade & industry policy and an effective data-driven approach to track progress or failure, is being reflected clearly in monthly economic data of Malawi, as reported through the RBM.

“AFORD’s offer to Malawians; in its contribution while in Government come September 2025, will be a total transformation of the economic landscape of Malawi, in which its manifesto will inform in detail during its launching.

“There is an urgent need to position the Malawi economy towards aligning to the aspirations its people in ending poverty, inequality and unemployment.”