Ecama punches holes in budget


The Economics Association of Malawi (Ecama) has punched some holes in the 2020/21 National budget presented by Finance Minister Joseph Mwanamvekha on Friday.

While commending the government for continued International Monetary Fund (IMF) confidence as reflected by successful completion of Extended Credit Facility (ECF) second and third reviews, reduction of Excise Duty rate on opaque beer from 40 percent to 30 percent as well as introduction of 10 percent surcharge on avoidable imports such as excise books, text books, blankets, stick matches, biscuits, crisps, dressed poultry and eggs to stimulate local production, the economists body says the budget framework is still inconsistent with the real economic situation.

In its post-budget analysis, Ecama says it is not clear how a stable macroeconomic environment will be sustained amid the economic challenges envisaged in 2020/21 financial year.


“Sound macroeconomic frameworks include not only price stability which so far has been the major and consistent achievement but also a well-functioning real economy, sustainable debt and healthy public and private sector balance sheets.

“In the face of an ailing economy, debt vulnerabilities, persistently growing budget deficits, poor balance sheets, among others; it becomes unpractical to assume that the exchange rate will be anchored at K750 per dollar the fiscal year, inflation to remain in single digits at 9.9 percent and the policy rate at 13.5 percent,” Ecama says.

Among others, the economists point out a number of inconsistencies which include the fact that the anticipated 35 percent drop in tax revenue must consequently lead to a reduction in expenditure.


Ecama further notes that investments and expected results in energy sector not coming out clearly to build investor confidence.

The economists have underscored the need to strike a balance between long term investments and making energy affordable in the short term.

“Broadening tax base is a toll order amid a myriad of economic challenges. Revised growth rate for 2019 to 3.1 percent was expected but a forecasted further economic decline of 1.9 percent or -3.8 percent for 2020 spells doom for the economy.

“With already low allocation toward development expenditure, there is a huge concern that in event of low revenue realisation, which is more probable, development budget is more likely to suffer expenditure cuts and this means the country’s economic growth will be more stifled as country’s limited resources will continue to finance consumption,” Ecama says.

According to the economists, government needs to re-prioritise targeted projects and programs in order to minimise expenditure and reduce the deficit in order to get the best out of the available resources.

“Fisp needs an overhaul and not increasing resources to it. Resources allocated to Fisp could be re-prioritized to more productive projects. Money allocated to Fisp (K35 billion) is more than what has been allocated to the budget line under purchase for medical drugs and purchases (K27.3 billion) at a time when our hospitals are running with insufficient drugs in face of Covid-19 threat,” Ecama says.

Presenting the budget under the theme Economic Recovery, Mitigation and Building Resilience, Mwanamvekha said government will continue with efforts to tackle the four key issues namely; economic growth, job creation, economic empowerment, and infrastructure development.

Mwanamvekha was quick to point that the budget implementation challenges experienced during the current fiscal year would continue into 2020/2021 fiscal year.

“In fact, Madam Speaker, the 2020/2021 fiscal year will be much more challenging as Government is likely to be hit hard by the coronavirus pandemic. Revenues are expected to decline even further amidst increased need for resources to adequately respond to the effects of the pandemic,” Mwanamvekha said.

Facebook Notice for EU! You need to login to view and post FB Comments!
Show More

Related Articles

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker