The World Bank says fiscal pressures from elevated global commodity prices may exert an upward push on expenditure and thus run counter to fiscal consolidation aims.

In its recent economic analysis for Malawi, the bank observes that the upward pressure will likely come from the implementation of the Affordable Inputs Programme (AIP), and materialisation of contingent liabilities, from Agriculture Development and Marketing Corporation (Admarc), for example, which requires K64 billion as bail out.

Lowe: We are monitoring

Reads the analysis in part: “Expenditure is projected to increase to 24.7 percent of GDP in 2022/23 financial year, over an outturn of 23.3 percent of gross domestic product [GDP] in 2021/22 financial year.

“This is driven by a projected surge in acquisition of non-financial assets, up to 7.1 percent of GDP from 3.9 percent of GDP in 2021/22. Other than interest, all other categories of expenses are projected to decline over their outturn in 2021/22.”

However, the bank projects revenues to rise to 17 percent of GDP in 2022/23 financial year, with across-the-board increases in all major categories, though this relies on optimistic assumptions.

“Fiscal space is expected to remain constrained, despite an increase in revenue and reduced spending,” said the bank.

In the 2022/23 financial year, government projects the fiscal deficit to decline slightly to 7.7 percent of GDP from an outturn of 8.7 percent of GDP the previous year.

Any type of farming is facing fertiliser price hikes

Government has also planned significant spending reductions in social benefits driven by AIP reform, with the overall budget of the AIP for FY2022/23 set at MK 109 billion, a 33 percent reduction relative to the FY2021/22 outturn.

However, speaking during the launch of construction works for Northern Cluster Irrigation schemes at Marko Irrigation Scheme in Traditional Authority Mwabulambya in Chitipa recently, Minister of Agriculture Lobin Lowe said prices for fertiliser will likely go up due to the devaluation of the kwacha and global prices of the commodity.

Said Lowe: “The Ministry of Agriculture can’t be spared the impact of devaluation and even the global market of fertilisers. We are monitoring and I can’t predict the prices as of now. We know and have seen fertiliser prices going up, and the price of fertiliser won’t be the same.”

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