Opposition damns 2020/21 budget

Felix Mlusu

Democratic Progressive Party (DPP) spokesperson on finance matters, Joseph Mwanamvekha, had a field day in Parliament Monday when he tore apart the 2020/2021 national budget describing it as consumptive, unfriendly to the business sector, constructed based on unrealistic expectations and a total loss to Malawians.

In his 30 minute response to the budget statement which was presented by Finance Minister Felix Mlusu on September 11, Mwanamvekha said the financial blueprint is a complete departure from the DPP belief in national budgets that are developmental, pro-poor, entrench macroeconomic stability and ensure inclusive growth.

Mwanamvekha said Malawians were in shock and in total disbelief hearing the Minister ending his budget statement without mentioning most of the promises made during the campaign period ahead of the fresh presidential election.


Mwanamvekha said the assumption that the economy will grow by 1.9 percent this year and 4.5 percent in 2021 is too optimistic.

He said the slowdown in the economic growth in strong economies in the wake of Covid-19 would greatly affect the growth of the local economy.

“It is, therefore, inconceivable to believe that Malawi is an exception more also considering the fact that since the first quarter of this year, most businesses in this country have sharply slowed down their operations with the worst affected being the tourism sector.


“It is not surprising to note therefore that the budget so presented doesn’t seem to recognise that there is Covid-19 which needs to be managed and navigate our way out of it,” Mwanamvekha said.

He added that the other assumption which has been unrealistically estimated in the budget is the stability in the exchange rate.

Mwanamvekha argued that already the Kwacha is on a free fall and firms are struggling to access foreign exchange to import necessary raw materials for their businesses and some of them have scaled down their operations as a result of the challenge.

“We also know that with the challenge of Covid-19, not many donors will come forward to our rescue with significant amounts of aid just as less revenues will come through diaspora remittances, FDI and tourism revenues.

“The consequences for all these are quite obvious in that we are likely to end with a huge negative balance of payments this year which will exert enormous pressure on the Kwacha,” he said.

Mwanamvekha added that the other assumption grossly underestimated in this budget is the one on the policy rate.

He said it is inconceivable to believe that monetary authorities will maintain the policy rate at 13.5 percent in the face of rising inflation, depreciation of the currency and huge liquidity injection from Treasury arising from the lack of fiscal consolidation at 7.5 percent of budget deficit.

“Prudent monetary policy requires that when inflation is rising and/or exchange rate is depreciating coupled with lack of fiscal consolidation, monetary policy should be tightened to tame medium to long term damages to the economy.

“The DPP expects the monetary authorities to rise to the occasion and do the right thing which is to tighten monetary policy by among others things, tightening interest rates, hence the assumption that the policy rate will be maintained at 13.5 percent in the 2020/2021 budget is simply inconceivable and at worst, bad economic policy,” Mwanamvekha said.

One the creation of one million jobs, Mwanamvekha said three things namely growths backed by a sound and favourable macroeconomic environment; huge infrastructure projects; and a wide range of proven private sector incentives for both local and foreign investors in sectors such as manufacturing, mining, tourism and agriculture value addition, are critical.

He, however, noted that none of the three critical things are there in the budget that Mlusu presented.

“As can be noted, with a fiscalised growth of 3.2 percent; domestically financed projects estimated at a mere K100 billion; a struggling private sector battered by Covid-19 and denied of fiscal incentives; collapse of the tourism sector; severe contraction in both FDI’s and diaspora remittance; gloomy macroeconomic outlook; widespread lockdowns and shattered business confidence,” Mwanamvekha said.

There was, however, drama in the House when Chairperson of the Budget and Finance Committee, Gladys Ganda, rose to present the committee’s stance on the budget.

After presenting the report, some members of the committee rose on a Point of Order to dispute the contents of the report, saying that it was not what they had agreed as a committee.

Other members called for the impeachment of the Ganda as the committee’s chair.

Speaker of Parliament, Catherine Gotani Hara, then ruled that the report be pended to clear out the misunderstandings.

Mlusu is expected to comment on issues raised by various commentators in the coming days.

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