Thursday, June 20, 2013
GOVERNANCE PLATFORM CALL FOR CREDIBLE AND CONSCIOUS DELIBERATION AND PASSING OF THE BUDGET: PARLIAMENT’S ROLE IN BUDGET REVIEW IS IRREPLACEABLE
Issued on Thursday, 20thJune 2013
The Governance Platform (GP) is a grouping of civil society organizations that are currently implementing programmes that advance good governance in Malawi. As a loose grouping with a clear mandate to stir responsive transparency and
accountability and citizen voice, the GP was formed during the DPP-led administration as a mechanism for collective and proactive engagement with government, adding value and complementing to the work of like-minded CSOs.
Through this, the Governance Platform seeks to consolidate the efforts of CSOs in sustaining citizens’ voices on emerging socio-economic and political governance issues.
The GP has closely followed the tabling of the 2013/14 national budget statement by the Minister of Finance and continues to follow the mood, context of the subsequent plenary proceedings in Parliament. As a platform interested in budget credibility, including the much needed independence and increased role of Parliament in the budgetary processes; we, the undersigned, wish to raise a few observations that are CFSC critical in bringing the budget close and responsive to the citizenry issues of concern.
The GP is further mindful of the earlier comments and observations raised by different actors, and is therefore driven by its commitment to stewardship, service for mankind, trust, transparency, accountability and mutual respect.
According to the Budget Statement for the 2013/14 fiscal year, the national budget is still being anchored around "No Net Domestic Financing". This fiscal anchor is reported to be premised at reducing the domestic debt stock to allow the private sector space to borrow at reasonable rates for productive investment.
Total revenues and grants for the 2013/14 financial year are expected to amount to K603.4 billion from K460.9 billion in 2012/13 FY. Domestic revenues are projected at K363.1 billion, representing 60.0 percent of total revenue and grants, while K240.3 billion are donor grants, representing 40.0 percent of total revenue and grants. Of the
total domestic revenues, tax revenues are projected at K328.1 billion while the non-tax revenues are estimated at K35.0 billion.
Grants, on the other hand are expected to increase by 36 percent from K177. 4 billion estimated for 2012/13 financial year to K240.3 billion.
The overall fiscal deficit for the 2013/14 FY is thus projected at K34.8 billion.
This deficit will be wholly financed by foreign borrowing amounting to K42.0 billion. Part of foreign borrowing will also finance domestic debt repayment of K7.2 billion which in turn will reduce the domestic debt stock from K170.6 billion at the end of 2012/13 financial year to K163.4 billion at the end of the 2013/14 financial year.
• The Governance Platform partners are concerned that Government is not doing much to reduce the level of borrowing.
We note that while efforts are being made to stop domestic borrowing and repay domestic debt stock of about
MK170.8 billion, it appears that Government’s shift to foreign borrowing currently estimated at K42 billion puts to question its commitment to long term fiscal sustainability.
This is particularly important looking at the amount of loans Government is intending to borrow coupled with some of the seemingly unplanned project related loans that are not premised on viable returns.
• The Governance Platform is also worried with incorporation of some initiatives in the budget that are a duplication of existing Government’s efforts, and remain a drain of taxpayers through either direct financing or repayment of loans. One such effort is the new Mudzi Transformative Trust which in essence is a duplication of the Local Development Fund (LDF) and COMSIP projects.
As a platform we believe that any serious Government needs to be sensitive in avoiding efforts that are rather a burden to taxpayers, as this may be construed to be politically motivated ahead of the 2014 polls. It is our
considered view that any new initiative should be based on wide consultation and empirical evidence to justify its relevance and the prospects gains and returns on investments.
• While commending development partners for financing the budget to the tune of 41 percent of total expenditure, we therefore also wish to reiterate that Government needs to always strive to be cautious with donor aid as any lack of
concrete commitment from donors may render the national budget extremely difficult to execute. This is in line with other suggestions that Malawi should reflect and move with speed to reduce donor support through good, consistent
and sustainable monetary and fiscal policies. Unfortunately, it appears the Budget Statement remains blank and rather just ‘politically correct’ on strategies to reduce donor dependence but instead appeals for more support.
As a platform we believe this is attainable if Government is able to display total commitment in pronouncements and action reducing corruption and other forms of economic wastage.
• While the Budget Statement also makes emphasis on the development of the mining sector as a potential sector for economic growth in line with the Economic Recovery Programme, it is worrying that the statement lacks details
on the current performance of the sector to warrant this optimism for more tax incentives for recovery.
The Governance Platform is not in any way against provision of targeted incentives which are based on concrete economic prospect and a clear corporate social responsibility strategy for private investors; rather it remains worried that, unfortunately, to date, no one seems to know how much mining exploits such as Kayelekera and other operational ones are contributing in taxes or corporate social responsibility to serve as a basis for more such incentives.
It is even more worrisome that efforts by the August House to demand this information have always not been supported to facilitate the rich debate of the sector that should yield us the answers long awaited; thereby leaving room for perceived speculations about Government led corruption in the sector.
We cannot sing the song of the booming extractive industry in Malawi when there is no information made public as to how much Malawians are benefiting through taxes and other royalties. We are still not clearly told of development initiatives by government financed through the budget from proceeds from mining revenues thus far, for instance.
• The Governance Platform further notes that many changes have been effected to the current national budget in attempt to improve the budget classification and information. While some developments such as simplification of the budget documents are welcome, we are however concerned with the missing allocations in the name of reclassification.
While there have been verbal pronouncements by the Minister of Finance in explaining where certain votes have been allocated, it is rather doubtful if such information is worthy trusting in the absence of written information as it could be easy for Government to just make such verbal claims for purposes of passing the budget.
Similarly, the budget votes that many stakeholders have raised their concerns on need to be procedurally and accordingly adjusted without and not through verbal assurances only from the Minister of Finance.
• The Governance Platform still remains worried with the manner in which the State Residences vote was handled by the Deputy Speaker of Parliament.
This is made against the understanding that there was a strong contrary opinion demanding further explanation on this particular vote in the House and that amidst this, the “No Passing Vote” was more than the “Yes Passing Vote”, and contrary to this, the Deputy Speaker still declared the Vote passed.
While the intention of every Malawian is to have the budget passed, we are aware that passing the budget without accountability and scrutiny is not only counter-productive but also a recipe for laxity in the performance of the budget.
It is for this reason that we find the Deputy Speaker’s remarks urging Members of Parliament to pass the budget running contrary to their mandate. This, in a way, rather puts to question the neutrality of the Office of the Speaker in moderating the enactment of the national budget.
• The Platform finally observes a huge imbalance towards consumption without supportive focus to the productive sectors in line with the export-led growth through operationalisation of the National Export Strategy. A case in point is the FISP budget of MK60.1 billion in the MK118 billion budget for Ministry of Agriculture, which remains highly contentious with the gross in-efficiencies that are not giving us the returns on investments.
Perhaps it is high time that Government should rationalize such an allocation by for instance taking off say
MK20 billion (as championed by the Farmers Union of Malawi) towards the commercial oriented production for exports and forex generation.
The Governance Platform is cognizance of the complexity of the budget design and the need to promote a fair balance between efforts for private investment and the call for duty to public service delivery.
The Platform agrees with Government that there is need to continue with a tight fiscal and monetary policy stance, to ensure that Government operations do not contribute to soaring inflation as well as interest rates; and the crowding out of the private sector.
However, as the Minister of Finance is calling for every citizen to continue to strive to live within our means, Government must also demonstrate by act and deeds that they are equally taking full responsibility in spending within their means without compromising on public service delivery.
Specifically, the Governance Platform wishes to make the following recommendations:
1. Parliament is encouraged to give the national budget due justice by ensuring that every vote is scrutinized and passed with clear understanding.
This is cognizance of the importance of the supply committee of the budget for which the Office of the Speaker needs to facilitate such rich critique rather than bulldoze the passing of the budget that lacks its people-centred and long term aspirations of Malawians.
It would be in the interest of Malawians to see unjustified allocations recommended for review or reduced or indeed
completely rejected such as the OPC, Minister’s Office, State Residence, FSIP and internal travels.
2. While the deficit in the budget has to be filled through borrowing from external sources or more revenue collection, we urge Government to be cautious with level of borrowing to avoid accumulating borrowing debt stock. It is for this reason that we find the shift from domestic borrowing to foreign borrowing as insignificant effort to the call to live within our means.
3. The Minister of Finance is duty bound to avail written evidence of explanations made on any missing budget allocations or those that have been reclassified as he is responding to concerns by the August House. We therefore caution Members of Parliaments from accepting verbal claims as there is a risk of passing a budget that looks different in the House yet executed in the same away as presented in the initial detailed draft budget estimates.
4. On one hand, we urge the donor community to fulfill its resource commitments for 2013 and beyond in order to support faster stability of the exchange rate and moderation of inflation.
On the other hand, we urge and insist that Parliament and Government should find concrete strategies to reduce donor
dependency both in the medium and long terms.
5. The Governance Platform reiterates the call for the establishment of the National Planning Commission. This will help to bring order in the borrowing of loans as currently there are some initiatives (such as Mudzi Transformative
Trust and one family one cow) that are not only suspicious but also not pressing priorities worthy investing on though politically popular.
We need choices and decisions that transcend political considerations.
6. In the work of self-reliance and economic recovery, we agree with Government that the people of Malawi have no wish to turn into a nation of subsidies.
By extension, we wish to bring to the attention of Government and Parliament that the people of Malawi are active and apt citizens to determine which subsidies are appropriate.
Henceforth, we urge politicians to desist from initiating more subsidies in the name of the poor for political mileage as doing so will trap Malawians in a cobweb of ‘dependency’ for life.
7. Above all, we urge Government to put in place concrete strategies to promote fiscal discipline and improved public service performance in view of the low absorption capacity as stated by the Minister of Finance. Government must therefore be on track to minimize wastage, and foster prudence in the management of public finance by among others strengthen systems and procedures, and a clear performance based awarding system for public servants.
We further reiterate our earlier appeal to Government to lead by example by ensuring that it avoids unnecessary expenditures in the budget which has the potential to undermine the burden that Malawians in general are bearing.
Catholic Commission for Justice and Peace (national)
Centre for Social Concern (CFSC)
Civil Society Education Coalition (CSEC)
Malawi Health Equity Network (MHEN)
Malawi Justice Economic Network (MEJN)