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Budget balloons by K144 billion

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Joseph Mwanamvekha

Finance Minister, Felix Mlusu, yesterday asked Malawians to allow the Tonse Administration use an additional K144 billion of their hard-earned taxes in running the country when he presented the Mid- Year Budget statement in Parliament.

In essence, Mlusu meant that the K2.19 trillion the country approved in September last year had proven not to be enough to keep the wheels of the economy running up to June 30 this year, hence raising it to K2.33 trillion.

Fully aware of the enormous expectations from various groups of Malawians , including the private sector pressing for bailouts, youths eagerly waiting for one million jobs, and teachers demanding Covid 19 risk allowances, Mlusu opted to play it neutral.

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Just as a driver navigating in the dark in an unfamiliar territory sticks to the white line, Mlusu was very cautious in his mid-year budget statement, not promising too much but at the same time not making any significant changes to the tax regime, as the second wave of Covid 19 has made the future very hard to predict.

Despite the country saving K20 billion in the implementation of the Affordable Input Programme, Mlusu said the demand for extra resources was exacerbated by increased Covid 19 spending, growth in salaries for additional health workers as well as increases in the development budget.

“Both recurrent expenses and development expenditure lines have been adjusted upwards to K1.718 trillion and K615.8 billion, respectively. Development expenditure has been increased from an approved provision of K511.2 billion to K615.8 billion, representing an increase of K104.7 billion.

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“Of the K104.7 billion, foreign financed projects amount to K100.8 billion on account of projects which became effective during the course of the financial year. Domestically financed project budget has also been increased from K100.9 billion to K104.7 billion on account of increased allocation to finance the new Ifmis project and also to develop detailed designs for the judicial complex,” Mlusu said.

The local Chancellor of Exchequer said domestic revenue to the end of the year is projected to increase from K1.179 to K1.186 trillion on account of a positive adjustment in non-tax revenue, such as dividends and surpluses, while tax revenue is projected to remain at K1.116 trillion.

According to Mlusu, total deficit for the 2020/2021 fiscal year has been revised upwards from K755.1 billion to K810.7 billion, or 8.8 percent of GDP.

He said the deficit is expected to be covered through foreign financing of K246.3 billion, with the balance of K564.4 billion programed to be financed through domestic borrowing.

But Democratic Progressive Party spokesperson on Finance, Joseph Mwanamvekha expressed worry over the projected increase in borrowing which he said would crowd out the private sector.

“If you look at the increase in the budget deficit, it is very huge. A jump from K755 billion to K810 is significant. If such borrowing continues, it would crowd out the private sector and the private sector will never thrive because of that,” Mwanamvekha said.

He added that the budget is more consumptive than developmental, adding that there is very little in the budget for development than consumption.

Indigenous Businesses Association of Malawi (Ibam) President, Mike Mlombwa, said they wanted to hear measures that would help businesses that have been limping in the wake of Covid 19.

He was, however, optimistic that President Lazarus Chakwera would touch on that area in his weekly address this week as he promised in his national address last Sunday.

This is what Economics Association of Malawi(Ecama) president Lauryn Nyasulu had to say on the budget:

“We commend government for coming out on plans to address the Covid-19 pandemic and ensuring that resources are provided and lives are safeguarded. This however, will have to be followed up with prudent and efficient utilisation of the resources. Downward revision of AIP by K17.8billion will also go a long way in meeting some of the obligations by Government.”

She said the challenge remains on the fiscal deficit and financing of the deficit.

“The projected expenditure increase (about K144 billion) for the second half is much more than the projected revenue increase (about K88.8 billion), further widening the fiscal deficit. This will exert more pressure on the domestic market as Government continues to rely on the domestic market to finance the deficit,” she added.

According to Mlusu, the Tonse Government is working on a policy on free electricity and water connections, adding that implementation is expected to commence during the 2021/2022 fiscal year.

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