Finance Minister Simplex Chithyola Banda is Friday facing Parliament for the first time in his capacity as the country’s Chancellor of the Exchequer to present the 2023-24 Mid-Year Budget Statement.
Chithyola Banda has a mammoth task presenting a reviewed financial plan that should reflect the situation on the ground.
Already, the national budget is off-rail as almost all parameters have gone rouge with glaring mismatches between assumptions anchoring the financial plan and reality on ground.
The first six months of the 2023-24 financial year have been characterised by shortages of foreign exchange and fuel, a volatile Kwacha on the exchange market and fluctuating inflation.
In the 2023-24 National Budget, the third under the Tonse-led administration, the Treasury assumed that the local economy would swell by 2.7 percent this year.
But due to subdued activity and effects of Cyclone Freddy, fresh estimates point to a 1.9 percent real gross domestic product growth.
Already, most other macroeconomic fundamentals are in red.
Headline inflation—the rate at which commodity prices change at a given period in an economy— maintained an upward spiral for the greater part of the year to 27.8 percent.
Initially, the Treasury projected inflation to average 17.9 percent in 2023, but the Monetary Policy Committee of the Reserve Bank of Malawi sees it at 29.5 percent.
But industry captains and other experts have high expectations to see the Treasury realigning budget lines with reality, a task which would require sacrifices.
The Economics Association of Malawi (Ecama) believes the Treasury should accept that the assumptions have been missed and the coming budget statement should reflect realistic assumptions.
Ecama President Betchani Tchereni believes the remaining six months are enough to work towards stabilising the economy using tough decisions.
“Six months is long enough to stabilise the economy but the question is what will happen after stabilisation? What will we do to make sure that the economy starts growing? Growth is the biggest part,” Tchereni said.
Institute of Chartered Accountants in Malawi Chief Executive Officer Noel Zigowa believes, in the short term, the government should focus on improving revenue collection to contain fiscus pressure.
Zigowa is of the view that the quickest way to improve revenue collection is the reintroduction of the voluntary compliance window.
Malawi Confederation of Chambers of Commerce and Industry President Lekani Katandaula said the government should clearly outline decisive measures to cushion the industry and Malawians from shocks of the recent 44 percent Kwacha devaluation.
“We need projects that can produce goods that can be exported for forex generation or act as substitutes for imports to save foreign exchange and make the goods affordable,” Katandula said.
Employers Consultative Association of Malawi President George Khaki proposed removal or reduction of taxes to make goods affordable, value addition to goods from Malawi, allowing qualified Malawians to work outside the country and extending social cash transfers among measures towards containing the pressure.
“A lot of people are falling into poverty, hence the need to cushion them by offering them cash and making goods affordable on the market so that they are able to purchase,” Khaki said.
On Monday, Chithyola Banda said the government banks on a resumption of direct budget support.
