Opposition Democratic Progressive Party (DPP) Monday said the 2022-23 proposed national budget stands on shaky ground following the government’s decision to bank on the exchange rate.
DPP shadow minister of finance Ralph Jooma said the exchange rate could not be relied on considering that Malawi is a net importing country as opposed to a predominant exporter.
When he presented the national budget statement to Parliament on February 18, Finance Minister Sosten Gwengwe premised the financial plan on a number of assumptions including the exchange rate.
However, Jooma, who was responding to the finance minister’s statement, said the K2.84 trillion national budget may fall if changes in the exchange rate were ignored
“We may not like the current behaviour of our exchange rate but we cannot avoid factoring it in the budget because a budget contains the cost of goods and services. A budget has to be priced and priced correctly.
“Look at what happened to the 2021-22 budget; the government goofed big time on the pricing [aspect] of the budget. It assumed the rate of K780 to the [United States] dollar but the actual outturn was way over K1,000 to a dollar. The end result is that the budget failed to produce the intended amount of asserts, goods and services,” Jooma said.
He observed that, in Malawi, where the economy is driven by critical imports, namely fuel, agricultural inputs, pharmaceuticals and raw materials for industries, the rate of exchange has the capability of influencing all other factors.
He said, once the exchange rate misbehaves, inflation follows suit and that consequently no Reserve Bank of Malawi governor would hold the policy rate but tow the line.
“When these macro-economic factors fall off, GDP [gross domestic product] may not grow as anticipated resulting in revenue mobilisation under performance,” he said.
The DPP shadow finance minister also took a swipe at Gwengwe for failing to match his words with action when he indicated that the government was geared to reduce public debt.
According to Jooma, instead of reducing public debt, the current budget will only fuel more borrowing
“The meaning of it is that, by end of the financial year that we are about to start, our national debt will move from K5.8 trillion to K6.7 trillion. This will make it even more difficult for future fiscal space.
“Madam Speaker, every budget must endeavour to take citizens a step farther not a step backward. By making the debt levels worse than they are today, this 2022-23 National Budget will be taking us a step backward,” Jooma said.
United Democratic Front leader in the House Ned Poya said it was doubtful that the Tonse Alliance-led administration would deliver on its budget promises considering what he described as “its slow pace in doing things”.
Budget and Finance Committee of Parliament Chairperson Gladys Ganda said her committee had noted that allocation towards the Affordable Inputs Programme (AIP) had been reduced by 22.8 percent to K109.6 billion from K142 billion.
She, however, noted that the budget is silent on how many beneficiaries are anticipated in the upcoming financial year, making it difficult to assess the rationale behind, or impact of, this reduction.
“The committee nevertheless commends the government’s efforts to reduce transactional costs in the procurement of fertiliser under the AIP by purchasing it directly from manufacturers,” she said.