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‘Malawi government needs no extra resources for new wage bill’

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As the kwacha continues its free fall, there are fears that the government may not meet the new wage bill that may see the government coughing an extra K30 billion.

According to the budget statement presented last year by Finance Minister, Goodall Gondwe, in 2015, the wage bill in the 2014/15 fiscal year was K198 billion.

He, however, indicated that the figure would rise to K228.7 billion by December, 2016, in part due to planned wage and salary increases.

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Former Malawi Congress of Trade Unions president, Ken Williams Mhango, said issues of salaries and wages are not negotiable, especially when employee and employer have already agreed, hence the need for the government to try all tricks in the book to meet its obligation.

He, however, observed that that ability hinges on economic performance and other economic indicators.

But, in a written response, Ministry of Finance spokesperson, Nations Msowoya, said there was no need to panic as the government is on top of things.

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Msowoya said the Ministry of Finance was already taking care of the issue.

“K198 billion, as indicated, is for 2014/15 financial year while K228 billion is for the 2015/16 financial year. The difference caters for wage creep (inflation compensation), new recruits, and a wage increase averaging five percent awarded to junior civil servants only. The wage bill of K228.7 billion was already factored into the budget for 2015/16 and as such it does not need extra resources now,” said Msowoya.

However, despite Msowoya being upbeat, resource mobilisation has proven especially difficult for the government’s tax-collecting body, the Malawi Revenue Authority (MRA), in the 2015/16 fiscal year.

MRA missed its target for the first quarter of 2015 as it collected K193.58 billion between July and October 2015. The tax collector also missed its October target by five percent as it collected K53.03 billion against the target of K55.97 billion.

It also missed its revenue collection target for December 2015 by about K3 billion, according to the MRA December tax outturn published this month.

But Msowoya said MRA’s underperformance was factored long before government representatives met an International Monetary Fund team in September last year.

“Tax revenues underperformed compared with the approved budget. However, when we had article IV consultations with the IMF in September 2015, we already revised the projections. The first half performance does not significantly deviate from our revised projections. The wage bill was fully financed with the revised revenue projection and, therefore, there is no cause for worry in as far as wages and salaries are concerned,” said Msowoya, before adding:

“As usual, any revisions to the budget will be done during the mid-year review in Parliament.”

Members of Parliament are expected to meet in Lilongwe for the review this month.

The Reserve Bank of Malawi (RBM), on its part, has hinted that it intends to put a tight grip on monetary policy in the remaining half of this fiscal year.

In its first Monetary Policy statement for 2016 released this month, RMB indicated that it “…intends to maintain a tight monetary policy stance in the coming months while ensuring sufficient foreign exchange reserves to support private sector activities”.

Despite RBM’s plans, however, the kwacha has slumped by 6.4 percent in the first month of 2016, slipping to K745 to the dollar from K700 at the start of the year.

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