Budget and Finance Committee of Parliament has advised Treasury to consider implementing a zero-deficit budget to cushion the country from rising public debt stock.

The call comes after the International Monetary Fund (IMF) warned Malawi against overborrowing, while the current fiscal deficit is 32% higher than last year’s fiscal deficit of MK183.621 billion. In the 2018/19 financial year, the Malawi government will spend a projected K183 billion (3.4% of GDP) as interest payments for the debts.

Budget and Finance Committee chairperson Sosten Gwengwe stated that since authorities are spending beyond budget, a zero deficit would be necessary to avoid extending the already worse deficit. “We need to be moving towards the zero deficit budget and this can be achieved through strict austerity measures from the top political leadership. The truth of the matter is that we have over-borrowed and it needs urgent and drastic measures to deal with the problem because we cannot just be watching.”

The IMF also warned that Malawi is at growing risk of debt distress because of heavy borrowing, advising government to keep borrowing to a minimum and only procure loans that are concessional. The Zero Deficit Budget (ZDB) is a financial strategy laid out by Minister of Finance Ken Kandodo of Malawi under the Bingu wa Mutharika administration that is based on zero-based budgeting. This is a new approach to economic financial budgeting for Least Developed Countries where the government aims to finance all the recurrent expenditures using its own domestic resources