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Tough task for Felix Mlusu

Budget records K238 billion deficit in first half

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Lauryn Nyasulu

Finance Minister Felix Mlusu has an enormous task ahead of him this morning, when he has to convince Malawians that the K2.2 trillion 2020/21 national budget presented to Parliament on September 11 last year is still on track.

Obviously, circumstances have significantly changed since Mlusu presented the budget, with the economy facing additional challenges including the second wave of the Covid pandemic which, according to President Lazarus Chakwera, has left Malawi requiring $230 million (about K179.4 billion) to mount a good challenge.

But Mlusu’s headache definitely comes when he peeps into the national kitty, where the figures remain far from impressive, with revenue being heavily dwarfed by expenditures and prospects remaining hazy.

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Cumulative figures from the Reserve Bank of Malawi show that, from June to December, the country collected tax amounting to K684.5 billion while expenditures were recorded at K922.2 billion.

The highest revenue collection was recorded in December at K149.7 billion while November was the worst of the six months at K93.7 billion.

On the expenditure side, December had the highest expenditure at K231.9 billion while August had the lowest expenditure at K109.8 billion.

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During the first half, the budget faced a deficit of K238 billion.

Economics Association of Malawi President Lauryn Nyasulu said the economists body expects that the budget review will come out clear on how resources provided for Covid are being managed.

“It will be important for the government to shed more light on how it will minimise accumulation of more debt and domestic debt in particular.

“With debt to GDP [gross domestic product] ratio of over 65 percent and projected to be over 70 percent in 2021, government needs to shed more light on the debt retirement plan of some of the old debt,” Nyasulu said.

On its part, the Malawi Confederation of Chambers of Commerce and Industry Director of Business Environment and Policy Advocacy Madalitso Kazembe said the Covid crisis had thrown the 2020-21 budget into disarray as government revenue collections have plunged due to the challenging business environment arising from the impact of Covid.

“As a consequence of that, we do expect the deficit for the soon-to-be concluded year to rise. Even for the coming fiscal year, some uncertainty may persist on revenue and expenditure [levels] as the economy recovers,” Kazembe said.

Farmers Union of Malawi President Frighton Njolomole said farmers had high expectations on the budget review.

Njolomole said, over the years, the country’s farmers have struggled due to lack of market opportunities, adding that they expect Mlusu to commit resources to Agricultural Development and Marketing Corporation to allow it to move early into the market and buy produce at recommended prices.

“We need to rescue farmers from unscrupulous traders,” Njolomole said.

On his part, Indigenous Businesses Association of Malawi President Mike Mlombwa said they expected Mlusu to announce policies that would help to jump-start most of the local businesses, which have been heavily affected by coronavirus preventive restrictions.

Mlusu recently indicated that he is counting on development partners’ support to Covid response programme to help the Treasury save the budget from collapsing.

“Obviously, the emergency spending will affect the national budget but we are receiving very good support from our development partners,” Mlusu said.

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