By Emmanuel Chilemba & Mercy Matonga:
All roads lead to Parliament Building in Lilongwe today, with Parliament set to convene for the mid-year budget review.
Economic commentators have meanwhile said they hope Capital Hill would find a lasting solution to economic challenges besetting the country.
Finance and Economic Affairs Minister Simplex Chithyola Banda will be the man to watch as he faces a litmus test to make tough decisions of either trimming some budgetary allocations or raising more revenue to achieve all projected assumptions.
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Apparently, the K5.9 trillion budget that was presented on February 23 this year has gone off track, with some of the parameters it was premised on losing grip.
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For instance, in the current fiscal year, the inflation rate was projected to average 23.4 percent.
Nonetheless, it has been on an upward spiral, seen at 32.4 percent as of October this year.
As for the growth rate, which was initially projected at 3.6 percent, things have not gone according to plan.
Instead, the third Monetary Policy Committee meeting revised the projection downwards to 2.3 percent.
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Consequently, there has been a mismatch between revenue lines and expenditure in the first months of the fiscal year, as, in the first quarter government budgetary operations recorded a deficit of K555.1 billion.
This was on account of total revenue amounting to K743.3 billion against expenditures of K1.3 trillion during the quarter under review.
In a recent written response to The Daily Times questionnaires, Financial Market Dealers Association of Malawi (Fimda) and Economics Association of Malawi (Ecama) emphasised the need to tighten monetary policies to keep the fiscal plan on track.
Ecama President Bertha Chikadza observed the need for the Treasury to put much focus on measures aimed at addressing inflationary pressures that have escalated the cost of living due to both global price dynamics and domestic food supply constraints.
“Parliament is likely to evaluate fiscal measures to curb inflation and restore purchasing power, especially for essential goods. In parallel, exchange rate stabilisation will be crucial, given the recent liquidity challenges and impact on the trade balance and import costs.
“Policymakers may explore refined forex management strategies and incentives to enhance foreign exchange reserves and bolster export competitiveness,” Chikadza said.
She further emphasised the need for the revenue mobilisation strategy to undergo scrutiny, saying increased fiscal pressure highlights the necessity of broadening the tax base and improving collection efficiency.
Chikadza said such reforms could include streamlining tax administration, closing loopholes and potentially introducing new revenue channels to bolster public finances.
“Further, with public debt levels posing a significant challenge to fiscal flexibility, debt management strategies will likely be a priority. Parliament may consider mechanisms for debt restructuring or relief, as well as a recalibration of borrowing practices.
“Agriculture, a sector central to food security and rural livelihoods, is expected to attract attention as the country grapples with food price inflation and climate-related vulnerabilities. Enhanced funding for climate-resilient agricultural practices and productivity-enhancing initiatives may emerge as focal points,” Chikadza said.
On his part, Fimda President Lesley Fatch said the budget review meeting offers the Legislature a chance to reconsider and drive initiatives that support and incentivise the productive sectors of the economy.
“Especially considering the prevailing negative trade balance, high interest rates and increasing inflation, we anticipate initiatives that incentivise local production for import substitution, local value addition to the products we export as opposed to raw exports and, more importantly, discouraging non-essential imports that put pressure on the limited resources and our currency,” Fatch said.
He further noted that the current economic environment, where industries are operating at reduced capacity, would likely put pressure on domestic revenues, especially tax revenues.
This, he said, called for prudent fiscal spending to be the biggest component of the review to ensure that government ministries, departments and agencies are spending within budget limits.
Fatch said this could go a long way in ensuring that the growing budget deficit is contained.
“And being the arm of government that provides checks and balances to the Executive, we anticipate Parliament to guide the Executive, through the government Treasury, on prudent fiscal spending to contain the increasing national debt levels, whilst ensuring government ministries, departments and agencies have sufficient funding to run their operations,” Fatch said.
The 2023-24 national budget was revised by K540 billion from the initial K3.79 trillion to K4.33 trillion.
This was on account of the jump in overall expenditure, with government employees, public debt interests and social benefits continuing to demand a huge piece of the budget cake.
On his part, Consumers Association of Malawi Executive Director John Kapito said it would be better if Parliament would focus on the challenges that Malawians are facing.
“Right now, we don’t have fuel; we don’t have fertiliser and there is hanger too,” Kapito said.
A statement from the Office of the Speaker of Parliament Catherine Gotani Hara indicates that the sixth meeting in the 50th session starts this afternoon.
According to the statement, the meeting will run from Monday, November 25 to Friday, December 20 2024.
“The Office of the Speaker of the National Assembly wishes to inform all Cabinet ministers, deputy ministers, members of Parliament, and the general public that the Mid-Year Budget Review Meeting for the 2024-25 Financial Year will take place from Monday, 25th November to Friday, 20th December 2024, in the Parliament Chamber in Lilongwe,” the statement reads.
