Mid-year budget review: What’s inside?
Chithyola Banda: we need to do things differently
Minister of Finance and Economic Affairs, Simplex Chithyola Banda, has today presented the 2024-25 Mid-Year Budget Review to Parliament.
The review emphasized austerity measures, fiscal reforms, and strategies to mitigate economic challenges stemming from local and global pressures.
“Considering the macroeconomic environment, we need to do things differently to allow our economy to recover by sacrificing today for a better tomorrow,” stated Banda.
Macroeconomic Overview
The global economic slowdown has affected Malawi’s growth prospects, with real GDP growth revised downward to 1.8% from the earlier projection of 2.3%.
Inflationary pressures remain high, driven by rising food prices and foreign currency shortages.
According to the statement, headline inflation averaged 33.8% from January to October 2024.
Revenue and Expenditure Performance
The minister said that at mid-year, total revenue and grants amounted to K1.72 trillion, falling short of the K2.22 trillion target.
Domestic revenue underperformed by 8.2%, largely due to lower economic growth and delays in implementing tax policies.
On the expenditure side, he stated that recurrent spending reached K2.24 trillion, while development expenditure stood at K438.8 billion, both showing variations due to implementation delays and forex scarcity.
Key Budget Revisions
The total revenue and grants for the fiscal year have been revised upward to K4.63 trillion, while total expenditure is now projected at K6.04 trillion.
Despite increased spending on critical areas, the fiscal deficit is expected to narrow slightly to K1.41 trillion, equivalent to 7.5% of GDP.
Wages and Salaries
An additional K201.2 billion has been allocated for wages and salaries, reflecting an 18.7% increase.
This adjustment includes salary realignments and the recruitment of health workers.
Food Security Initiatives
Food security expenditures have significantly risen, with maize purchase allocations increasing to K124.9 billion, a 468% jump, supported by World Bank financing.
The Affordable Inputs Program allocation was maintained at K131.6 billion.
Economic Recovery Measures
The government has introduced several initiatives to boost revenue and stabilize the economy:
Labour Export: Malawi’s agreement with Israel will provide jobs for 500 agricultural workers initially, enhancing remittances.
Carbon Credits Trading: Programs like the Kulera REDD+ have generated US$10.3 million, with further revenue expected.
Revenue Enhancements: Electronic excise tax stamps and expanded digital payment systems aim to curb tax evasion and improve collections.
“These measures reflect our commitment to enhancing revenue collection and addressing fiscal pressures,” noted Banda.
Development Projects
Key projects targeted for completion in the next fiscal year include the construction of Mzuzu University Library, Domasi Community Hospital, and several roads such as the Dwangwa-Kaphatenga-Benga road.
Public Sector Reforms
Chithyola Banda said the government is intensifying reforms to improve public finance management and enhance transparency.
The Minister highlighted progress in debt restructuring discussions with major creditors, including China, and plans to broaden electronic revenue collection.
Banda called for Parliament’s support in approving the revised budget estimates, emphasizing collective sacrifice for economic recovery.
“It is through fiscal discipline and reforms that we can ensure a better tomorrow for all Malawians,” Banda concluded.
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