Rédaction Africa Links 24 with Times News
Published on 2024-04-02 08:09:36
The Treasury has recently borrowed K100 billion from commercial banks to address a portion of pension arrears, according to reports. It is estimated that the government currently owes pensioners K134 billion in arrears, resulting in delayed payments to pensioners. This financial situation occurs amidst the K5.98 trillion national budget approved by lawmakers, which carries a deficit of K1.4 trillion. Finance Minister Simplex Chithyola Banda hopes to cover this deficit through borrowing.
Secretary to the Treasury (ST) Betchani Tchereni highlighted that there are still individuals awaiting their pension dues, with arrears accumulating over an extended period. To address this issue, the government is seeking ways to allocate resources to fulfill these pension obligations. Tchereni emphasized the importance of honoring these payments and reassured that the necessary resources will be sourced through revenue collection methods.
Willy Kambwandira, Executive Director of the Centre for Social Accountability and Transparency, criticized the government’s decision to borrow funds for pension arrears as indicative of a profound fiscal crisis. He underscored the importance of personal accountability for public officers responsible for managing pension funds, urging against borrowing with high interest rates to settle arrears. Kambwandira emphasized the need for sensitivity and discouragement of such practices.
Economics Association of Malawi President Bertha Chikadza acknowledged the growing national debt levels but highlighted certain protected expenditures that cannot be compromised. These include pension and gratuities, which must be given priority in government expenditure planning. Chikadza pointed out that revenue from the 2024-25 financial year budget is insufficient to cover all expenditures, necessitating borrowing to address the deficit, including the K100 billion for pension arrears.
The issue of delays in remitting pension contributions by employers was also raised, with K31.1 billion in outstanding pension contribution arrears reported as of June 2023. Reserve Bank of Malawi data indicated an increase in pension contribution arrears from K23 billion in December 2022.
Finance Minister Chithyola Banda expressed confidence in the Malawi Revenue Authority’s ability to meet revenue targets and narrow the funding gap to address budget deficits. The MRA has been tasked with a revenue target of K3.26 trillion in the approved budget. Chithyola Banda assured that measures have been put in place to accelerate revenue collection to mitigate delays in disbursing funds to government ministries, departments, and agencies (MDAs).
Overall, the government’s borrowing to settle pension arrears reflects a complex financial situation characterized by deficits, growing debt levels, and the need to prioritize protected expenditures such as pensions. It is crucial for stakeholders to collaborate on sustainable financial management strategies to address these challenges and ensure the timely and efficient delivery of pension benefits to retirees.
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