By Benadetta Chiwanda Mia:
As Parliament prepares for the mid-term review of the 2024-25 national budget this month, it appears a foregone conclusion that the financial blueprint is off course, based on several critical assumptions that informed the formulation of the K5.98 trillion budget.
Initially, the government projected inflation to average 23.4 percent for the financial year.
However, the inflation rate has been rising monthly, seen at 34.3 percent in October.
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This escalating inflation, coupled with a high exchange rate of K1, 751 in the official market and around K2, 600 in the parallel market for the US dollar, could significantly increase government expenditure costs.
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The economic growth rate was initially estimated at 3.6 percent for 2024.
However, a statement of the third Monetary Policy Committee (MPC) revised this projection down to 2.3 percent.
Additionally, the IMF and World Bank haver adjusted their forecasts to 2.0 percent and 1.8 percent, respectively.
On the tax revenue front, the Malawi Revenue Authority (MRA) has a collection target of K3.26 trillion for the 2024/25 fiscal year. Yet, for the first quarter, the authority managed to collect only K656.8 billion against a target of K748.1 billion.
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Treasury spokesperson William Banda said Minister of Finance Simplex Chithyola Banda would address all matters when presenting his mid-term budget statement to parliament.
“However, we are optimistic that the budget will be implemented successfully,” Banda said.
Economic analyst Booker Matemvu attributed the budget performance to a challenging economic environment.
“The exchange rate will likely deteriorate as we import more fertilisers and other essential farming inputs, in addition to maize imports, aimed at alleviating starvation among the populace.
“We are already witnessing an increase in both local and foreign debt, which is constraining investment and affecting fuel supplies,” Matemvu said.
He urged the government to adopt a realistic approach to the prevailing economic conditions to formulate effective solutions rather than maintaining a facade of normalcy.
