The nut cracker: A little honesty would help!

Tom Sangala June 14, 2016

33 3 minutes read

If the Executive and Parliament are serious about promoting “transparency,” they should start by adopting a more realistic narrative about economic indicators that underpin the current budget session. The budget session of parliament is not a game or a place to show superiority between the Executive and the Legislature.

The most sensible expectation of the population who voted for both the Executive and the Legislature is that the all parties scrutinising the budget figures should approach the budget with an open mind. The budget session should not be a blame game session but a session of give and take and concessions. It must be a thorough negotiation process that will resolve all the grey areas and make the budget implementable. That is what Malawians voted for, not which arm of government is superior to the other.

In economics assumptions are extremely important, in fact the assumptions one makes are critical to the conclusions of the analysis of any economic phenomenon in question. It is therefore important that the Parliamentarians before even debating the actual budget they should seek the truth from the Minister of Finance on the assumptions underlying the current budget estimates. This is extremely important because in a Presidential system of government the concept of is fundamental where the Executive, the Legislature and the Judiciary act as checks and balances on each other in the system. When it comes to the National Budget, the executive proposes the budget and it is then the roe of the Legislature to debate and pass the budget into law for the executive to implement.

Minister Gondwe told Parliament that the Malawi economy will in real terms grow by 5.1 percent and that the average inflation rate will be 17.4. I have tried to understand the rationale of this figure. It is impossible for many Malawians to understand what makes the IMF and the Minister of Finance so confident of the 5.1 percent figure. Is the Minister of Finance disputing the Reserve Bank of Malawi? If not how does his statement reconcile with what the Reserve Bank of Malawi said in its Annual report on page one: “Meanwhile, a rebound is expected in 2016 as the economy is projected to grow by 5.1 percent. However the growth rate could be revised downwards due to the continued negative impact of El-Nino weather conditions on the agricultural sector.”

In fact it is not only the Reserve Bank of Malawi that has categorically estimated that the economy will grow by less than 5.1 percent. In April 2016, the IMF in its Regional Economic Outlook for Sub Saharan Africa estimated that the Malawi Economy will grow by3.0 percent and stated the following on page 15: “Large parts of southern and eastern Africa are facing a severe drought, potentially threatening food security for about 40–50 million people. The drought, linked to the ongoing El Niño pattern … As a result, growth is projected to slow sharply in Ethiopia, Malawi, and Zambia…” As recent as last week even the World Bank in its Global Economic Prospects on page 23 indicates that the Malawi economy will only grow by 3 percent. Then why is the Minister of Finance continuing to argue that this economy will grow by 5.1 percent in 2016/2017? We deserve a little bit of honesty as a nation from the authorities. I think it is the role of parliament to get to the bottom of this discrepancy in projections.

Certainly, no one expects Minister Gondwe or any other official to face the public with a mea culpa message, but to completely ignore blatant discrepancies between the projected economic growth forecast is counterproductive. At this stage, everyone who has a reason to have an opinion on the economy including Parliamentarians are already aware that the Malawi economy is not as robust yet. It is their duty to hold the Executive responsible, accountable and ensure transparency including in the quality and accuracy of the statistics underpinning the budget.

The Malawi kwacha in continuing to depreciate at a steady rate, fuel prices have increased, the price of Maize has increased in the last few months. In addition our major export earber is not doing well. After eight weeks of sales we have only managed to earn $63.1 million while at the same time last year we earned 1.6 times more in value and only sold 1.4 times more tobacco. This means that on average the price of our tobacco has been lower this year, averaging $1.41 per kilogramme this year versus $1.62 per kilogramme.

It cannot continue that people in authority should always get away with making unrealistic assumptions every year during budget presentations and then admit that the assumptions were unrealistic in the next budget speech.