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Mixed views on national budget

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There are mixed views among economic commentators on the 2020/21 national budget performance, about one week before the new financial year commences.

This comes as on Wednesday, Parliament passed the nine-month 2021/22 National Budget, which is the Tonse Alliance’s second financial plan, pegged at K1.995 trillion.

The current government’s maiden budget which was valued at K2.335 trillion has been faced with myriad challenges including weak fiscal environment leading to a wide deficit.

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The financial plan has largely been characterised by expenditure overruns and revenue shortfalls.

In the 2020/21 financial year, the Treasury is expected to register a yawning fiscal deficit of K811.7 billion which Finance Minister Felix Mlusu attributed to subdued revenue performance, expenses in response to Covid pandemic and significantly high proportion of mandatory expenses.

Economic Associations of Malawi (ECAMA) Executive Director Frank Chikuta rate the performance of the budget as mixed bag.

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“The deficit is still worrisome; it is estimated to reach 8.8 percent of GDP by the end of the current financial year,” lamented he said.

To finance the deficit, government was expected to borrow K565.4 billion domestically and K246.3 billion from external sources.

According to Chakuta, this piles pressure on the government’s fiscal space as it pushes the obligation to settle the debt plus arrears forward while crowding out potential private sector borrowers from the local market.

“Performance of the next budget would largely depend on how the economic situation is going to be, mostly with regard to the Covid pandemic which is still wreaking havoc,” Chikuta said.

Economist from the University of Malawi Laston Manja said during the year under review, some sectors of the economy like agriculture had a robust performance, thanks to good rainfall pattern and efficient implementation of the Affordable Input Programme.

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