A difficult act
Minister of Finance Goodall Gondwe on Friday unveiled a K900 billion budget for the next financial year in which he has struggled to balance the absence of donors and the need for increased resources to buy food in the wake of drought.
“Unlike in the past years where we had budgetary support from donors, this year’s budget is premised on no budgetary support,” said Gondwe.
Surprisingly, Gondwe has not taken tough measures on taxes and cuts on subsidies.
Although he has only allocated K40 billion for Fisp, down from K57 billion in the last fiscal year, he has not indicated what measures have been put in place to avoid expenditure over runs which have characterised Fisp since its introduction 10 years ago.
Gondwe, who sounded low and distressed and hardly attracted applause from members of the August House while presenting the budget, warned members that there would be sharp cuts in allocations to some ministries and departments to allow the government buy maize.
He admitted that the lack of budgetary support has shrank the resource envelop and there was hardly any money for other national needs other than salaries and food procurement.
“It is crucial that Malawi should start restructuring its fiscal framework without expecting the budgetary support that we have been accustomed to receiving from abroad since independence,” said Gondwe.
He has put the 2015/2016 budget at K901.6 billion which, although appears to be higher in monetary terms than the 2014/15 revised total expenditure of K800.7 billion, is actually lower in real terms as it constitutes 26.2 percent of GDP while the 2014/15 accounts for 28.4 percent of GDP.
“The budget is characteristically reflective of the diminishing size of the resource envelope available to the government, as a percentage of GDP against the pressure of growing needs to provide critical public goods and services,” he said.
Gondwe admitted that the share of goods and services that will accrue to the public sector is projected to be lower than those consumed in the ending financial year.
In order to generate adequate local resources to finance government activities, Gondwe announced various tax measures aimed at improving administrative efficiency, encouraging tax compliance, and broadening the tax base.
Among the measures is the introduction of 10 percent excise duty on text messaging and all data transfers including internet and similar services for cellphone and fixed line telephone users.
However, Gondwe has reduced excise duty rates on motor vehicles with an engine capacity exceeding 3,000cc from 55 percent to 40 percent for vehicle not older than 8 years from 88 percent to 60 percent for vehicles between 8 and 12 years old and from 110 to 80 percent for vehicles older than 12 years.
Gondwe has also re-introduced VAT and excise duty on television and radio broadcasting equipment which was removed last year.
Excise duty has also been reduced on dry cell batteries from 30 percent to 10 percent while the threshold value for entry of goods on Customs and Excise has been increased from K100, 000 to K500, 000.
The minimum fine in the Customs and Excise Act has been revised upwards to K100, 000 from K10, 000.
Gondwe has also proposed several Taxation Act amendments, including exemption from capital gains tax for the transfer of property from an individual into a trust and charging of income tax on deemed interest earned on interest-free loans.
Off-budget resources which Gondwe expects Malawi to receive from donors include K55.6 billion for the Ministry of Health; K14.4 billion for the Ministry of Gender; and K2.3 billion for the Malawi Police Service.
“Certain votes, particularly those in the social sector, may appear Under-funded, but may actually be adequately funded when off-budget donor support is added to the budgetary allocation,” said Gondwe.
According to Gondwe, about K8 billion has been spent on the procurement of maize both locally and internationally while an estimated additional amount of K13 billion will be spent on the same in the forthcoming financial year.
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