Introduction
This note reviews the 2003/04 Budget Statement delivered by the Minister of Finance on 4th July, 2003. While poverty and unemployment have evidently been on the increase, economic growth has remained low or negative in recent years. Hence the theme of this year’s Budget “Macroeconomic Stability: a Pre-condition for Economic Growth and Poverty Reduction in Malawi” is both relevant and timely for two reasons. First, poverty reduction takes place only when there is substantial and sustained economic growth. Second and in the context of Malawi, which is a poor country characterized by a highly unequal pattern of income distribution, poverty reduction can only be sustained if the poor and small-scale operators are directly and adequately involved in the targeted economic growth programmes. Thus central questions to be addressed in this report are:
- Is there adequate provision for “pro-poor and small-scale sources of growth” in the 2003/04 Budget?
- Will the estimated real economic growth rate of 3.4 percent in 2003/04 be achieved in the context of the 2003/04 budgetary framework?
The first part of the theme for the 2003/04 Budget highlights the point that restoring macroeconomic stability is a pre-condition to achieving both poverty reduction and economic growth in Malawi. The Budget Statement for 2003/04 acknowledges the following as the fundamental constraints in this regard: the prevailing high interest rates associated with Government’s appetite to over-spend relative to available resources, the resulting huge domestic debt stock, and unemployment resulting from weak economic growth. Needless to add that weak economic growth, for its part, does not facilitate the realization of macroeconomic stability. We will, in this paper, question and analyse whether the 2003/04 Budget has adequate provisions for addressing these fundamental constraints and generating an adequate level of macroeconomic stability.
In brief, this presentation will focus on the following key issues of the 2003/04 Budget:
- pro-poor expenditures, analyzing how these have evolved over time and their relative importance in this year’s Budget;
- non pro-poor expenditures, analyzing how these impact on poverty reduction and economic growth;
- pro-poor growth expenditures: analyzing their adequacy relative to allocations supporting large-scale sources of growth, and assessing whether constraints to economic growth which do not require funding are being adequately addressed by Government;
- analysing the adequacy of capacity to implement the Budget in the key social and economic growth ministries, the effectiveness and efficiency of the expenditures being incurred at the local level in relation to supervision/administration costs incurred at the ministry headquarters: i.e. the need for expenditure tracking and for a functioning performance management system to enhance budget implementation will be highlighted;
- introducing the gender question: is the Budget gender balanced?
- macroeconomic stability: are there adequate provisions in the 2003/04 Budget for generating macroeconomic stability?
- the involvement of the Civil Society in the entire budgetary process.
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