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2002/03 POST-BUDGET REPORT
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| 1.3 Total Recurrent Expenditure |
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Recurrent expenditure is composed of statutory expenditure, personal emoluments, and Other Recurrent Transactions (ORT). Total recurrent expenditure was initially estimated at K32.2 billion (22.8% of GDP). Revised estimates indicate an increase in recurrent expenditure to K33.1 billion (23.3% of GDP). The Recurrent Account included K3.5 billion to pay for contingent liabilities and other prior commitments for loans guaranteed by Government for parastatals. Expectations were that the whole amount of K3.5 billion was to be generated from additional cost-recovery and cost sharing measures. Unfortunately, the revenue-generating measures failed to generate that sum of money.
1.3.1 Statutory Expenditure
Statutory expenditures include the presidency, public debt, pensions and gratuities, compensation and refunds. These are charges whose payment from the Consolidated Account is provided for by Section 174 of the Constitution of Malawi. General Compensation and 'any moneys required to satisfy any judgement, decision or award made or given against the Government by any court or tribunal other than those provided for in the National Compensation Fund' constitute part of statutory expenditure.
The Approved budget included statutory expenditures of MK10.7 billion or 33% of the Recurrent Account. The Table below gives the list of payments approved and
* The figures are as they appear in 2001/02 Budget Document No 4. Source: 2001/02 and 2002/03 Budget Documents No 4A Financial Statement for the Financial Year 2002/03
revised estimates for statutory expenditure. The Committee observed that Government may still have to honour payments, which have not yet been paid.
The table contains a column with items in the 2001/02 Statutory Expenditure as originally approved by Parliament. The Committee notes that the amounts allocated to individual items (as reported in the 2002/03 Budget Documents) have been adjusted.
The table shows that some payments under general compensation are not yet made. The Committee wants to know why these payments were not paid and whether they will be carried forward into the 2002/2003 Budget.
The Budget provided for MK1.0 billion for an ADMARC overdraft and payment to NFRA. To finance the operation, Government issued special stocks worth K700 million to the Commercial Bank of Malawi and National Bank of Malawi at 25% interest negotiable over a 3-year window. This operation delays payment and will cost Government more money in interest upon maturity of the stocks. The Committee wishes to know upon what basis Government made this decision when the provision for immediate payment was there in the statutory expenditures?
The provision for public debt charges was projected at MK6.57 billion for interest payment and MK8.4 billion for the repayment of principal. The total of MK14.9 billion (10.3% of GDP) makes 'public debt charges' the single largest budget item in the recurrent account. The official external debt is now at US$2.7 billion (equivalent to MK206.82 billion) and the official domestic debt stock is at MK23.0 billion. The total debt therefore represents 172.2% of GDP. The total debt service for the 2002/03 year will represent 25.2% of the total budget.
1.3.2 Personal Emoluments and Other Recurrent Transactions
Based on the budget analysis, the Budget and Finance Committee makes the following observations:
- The following votes exceeded their approved allocations (see annexe tables for the approved budgets per vote and revised estimates:
- State Residences: Has spent 70% more than the approved budget
- OPC: Has spent 2.7% more than the approved allocation
- Ministry of Defence: Has spent 7.2 % more than allocation
- Ministry of Agriculture & Irrigation: 12.3 % more than budget
- Office of the V. President: Has spent 31.4 % above the Budget
- Min. of Foreign Affairs: 41.6 % above budget
- Subventions: Funding to parastatals was 30.7 % above the budget
- Ministry of Information: ORT was 9.8 % above annual budget
- POLICE: 14.7 % above approved budget
- Commerce & Industry : 75.7 % above budget
- Prisons Department : ORT was 16.8 % above annual budget
- Geological Survey : 31 % above approved budget
In the 2001/02 Budget Statement, one of the expenditure control measures supporting the Budget was that "Disciplinary action to be taken against Controlling Officers who fail to adhere to the approved budget or exceed their provisions without Treasury authority.” (Page 32)
- The Ministry of Finance made the budget cuts single-handedly without considering PPE priorities. The Committee is concerned with some of the budget cuts as shown in the annexe tables. Of special mention are the following budget cuts, Judiciary (-38%), District & Local Government (-19%), District Assemblies (-50%), National Statistical Office (-19.2%) Ministry of Water Development (-38.7%) Ministry of Health (-8%), Women, Youth & Community Services (-30%), Ministry of Justice (-28%). The Committee wishes to know the criteria used to revise the recurrent budget and why Parliament was not engaged in this process?
- The share of ORT expenditure in total recurrent expenditure has not improved for the major sectors of agriculture, health and education. The shares were expected to increase because of additional pro-poor funding from HIPC injected in these sectors. Actual expenditure in agriculture and in health remain at the same level of 4% and 9.9% of total recurrent expenditure, respectively. The share of education has actually dropped to 13.1% after reaching 21% in 1997/98 (see table 10.9).
Source: World Bank Malawi Expenditures, Issues and Options
- (4) Vote number 277 (Special Activities) contained large payments that were not honoured even though they were provided for in the vote. The Committee wishes to know why the following payments were not made and whether their non-payment would mean their inclusion in the 2002/03 Budget.
- The Disaster Fund with MK100 million provision and only. Why was it not used during the floods and other calamities we have had in Malawi? How does the Disaster Fund work?
- Payment for graders is a lot higher than the budget. Did Malawi purchase more graders? Malawi paid out MK279 million when the budget was only MK180 million.
- The provision of K100 million for starter pack under vote 277 was done on the understanding that the amount was to pay for arrears accumulated during last year's budget. If this information is correct, then why was the whole amount not paid?
- For the 2002/03 budget, only K100 million has been estimated to be used for the payment of arrears on behalf of various Ministries /Departments. The amount seems modest in the light of the report in the Economic Report 2002 that Government owes utility companies more than MK696 million.
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