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Goodall Gondwe presents K1 trillion budget

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Amid a financial deficit, no substantial budgetary support and nearly half the population facing hunger, Minister of Finance Goodall Gondwe yesterday presented a K1.13 trillion budget aimed at steering the country through the troubled waters.

In his statement, Gondwe admitted in the House that the budget will be implemented at the time the country is facing a myriad of challenges prominent of which is the weather-triggered hunger crisis.

Most donors are still reluctant to channel their support through the budget with African Development Bank being the notable Good Samaritan that has committed to provide budgetary grant of about US$18 million.

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Gondwe said total revenue and grants during the 2016/17 fiscal year are estimated at K965.2 billion.

Of this amount, some K708.8 billion will be tax revenue, K66.0 billion will be non-tax revenue, while K190.4 billion will be grants from cooperating partners.

While government plans to rake in the large percentage of revenue from taxes and grants, the Peter Mutharika administration will have to tackle a deficit of K171.2 billion, which Gondwe said will be financed by net foreign loans of K111 billion and net domestic borrowing of K60 billion.

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Hunger response

Gondwe announced that government is allocating K35.5 billion to be used for the purchase of 1.4 million metric tonnes of maize.

“Malawi is facing yet another wave of food insecurity, this time occasioned by the El Nino climatic episode….Maize production has been estimated at 2.4 million metric tonnes before adjusting for post-harvest loses. Importantly, it is estimated that the country requires an additional 790,000 metric tonnes of relief food to support an estimated 8.4 million people,” said Gondwe.

He said an additional 250,000 metric tonnes is required for sale in Admarc markets, while another 250,000 metric tonnes is required to restock the strategic grain reserves.

The past two successive droughts seem to have taught the government a bitter lesson as the Farm Input Subsidy Programme (Fisp) has apparently failed.

In the end, the programme has suffered a 50 percent reduction in its budget allocation from K63 billion last financial year to K31 billion in the 2016/17 budget.

The resources pruned from Fisp will now be redirected to irrigation initiatives under the Green Belt Authority.

“…the Government has decided to formally establish the Green Belt Authority (GBA) as a stand-alone public agency. The authority will be the official agent for the construction of these large scale irrigation infrastructural projects throughout the country,” said Gondwe.

To complement the strategy, Gondwe said the government will also engage commercial farmers to start growing maize which will be bought at market prices while also bolstering winter cropping.

The review of Fisp will also see the number of beneficiaries being trimmed from 1.5 million last season to 900, 000.

This, Gondwe said, is to ensure food security amidst climate change and “in the view of the declining number of poor people in the past ten years.”

Other expenditures

In terms of recurrent expenditure, out the K1.13 billion, recurrent expenditure has been pegged at K815.5 billion while development expenditure for the new fiscal year will be estimated at K317.4 billion up from the current K217.5 billion.

In terms of direct allocations to key line ministries, the budget has allocated K198.5 billion to the Ministry of Agriculture, Irrigation and Water Development.

The Ministry of Education, Science and Technology gets K147.6 billion while K95.8 billion goes to the Ministry of Health.

Public university students have also every reason to smile as a sum of K3 billion will cater for their loans administered by the Higher Education Students’ Loans and Grants Board. The amount represents an increase of 100 percent from allocation of last financial year.

Again, in the education sector, K22.3 billion has been allocated to various projects, with some activities planned include rehabilitation of secondary schools, construction of teacher training colleges, expansion of public universities and establishment of Mombera University.

Tax measures

With government depending on local resources to finance more than 80 percent of the budget in the absence of adequate budgetary support, Gondwe has announced several tax policy and administrative measures for the budget.

He justified the new measures as a means to broaden the tax base, improving tax administration, removing economic distortions to spur production, and encouraging compliance.

Government has since introduced the standard VAT rate of 16.5 percent on products which are currently zero-rated or exempted.

Mining prospectors will also from now onwards be eligible for VAT registration and “therefore, qualify for VAT claims”.

“This measure will not only relieve a VAT cash flow burden on miners, but will also act as an incentive in the mining sector and this is likely to spur the mining industry to greater heights,” he said.

Other investors and businesses which are winners in the new budget are those in the energy sector following the removal of 5 percent Customs Duty on Power Voltage Regulators.

The tax measures will also produce losers and they include those who issue cheques to Malawi Revenue Authority when their accounts are in red as they will face punitive measures.

“In order to reduce the costs of collecting moneys from dishonoured cheques and also to pay for the value of money, Mr. Speaker, Sir, I shall be presenting a bill that will levy a 30 percent penalty of the amount on the cheque that has been returned by the bank,” said Gondwe.

He said the penalty will be additional liability to the full taxes or duties due.

Those with insurance policy who previously enjoyed a tax rate of 21 percent are also in for a rude awakening as the rate has been hiked to 30 percent.

And on the same taxes, Gondwe had this other shocker, “Mr. Speaker, Sir, there are incidences when transactions are concluded between MRA and the private sector but no tax clearance certificate is presented or there has been a fraud.

“Currently there is a penalty of K50, 000 that is imposed on any person that fraudulently facilitates the conclusion of a tax clearance certificate….I shall be presenting a bill to this House amending the penal sum to five times the amount prejudiced or K10, 000,000, whichever is greater.”

Notably, the salary taxable band remains unchanged, although Gondwe announced an average 15 percent salary increment for civil servants in lower grades.

‘Future in our hands’

Gondwe emphasised that all Malawians, and not just government, now need to make critical decisions to move the country forward.

“The future of our country is entirely in our hands. That future demands of us to think carefully about what role each one of us is playing to change our fate, as individuals, institutions and people. The surest way to secure that future for posterity is by working hard to change our lives, and by remaining patriotic to our country,” he said.

He said the 2016/16 budget has been formulated to ensure creation of incentives for all Malawians to pursue and realise their full opportunities and potentials.

“… a change in the mind-set of our people is necessary now, more so than ever before. Unless that change occurs sooner rather than later, Malawi will not be able to cope with the bigger challenges that lie ahead…” he said

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