‘Budget emphasis is on consumption’
On Friday, Minister of Finance, Economic Planning and Development Goodall Gondwe presented the 2016/2017 National Budget Statement in Parliament pegged at K1.2 trillion. The budget has received mixed reactions. Our Reporter ALBERT SHARRA engages University of Malawi’s Chancellor College economics professor Ben Kaluwa to give his assessment of the budget statement and other issues.
Q
:There have been mixed reactions to the proposed national budget presented in Parliament. What is your take?
A
: It is a bold budget and I have problems on allocation of resources. You will see that the budget has put more emphasis on consumption rather than investment. This is appreciated in allocations such food, agriculture and irrigation. So, we are saying this is not a strategic budget. A strategic budget would have been actually more oriented towards structural problems that Malawians faces.
Q
: Which areas do you think government has overlooked?
A
: My point is that a lot more focus would have been put on infrastructure. On transportation, I believe we need to invest in railway line. Railway transport is cheaper than road transport although people are sceptical about it because of lack of security. So, it would be strategic to allocate more resources in such investments because they have an economic impact. They will go a long way in solving most of the problems we are facing in the country.
The advantage of such investments is that they will make Malawi more competitive and things will work out better in the short run and in the long run. That would be what I would actually put much prominence to, to make that infrastructure work.
There is also the issue of high cost of telecommunications, but that one is being addressed elsewhere. I am optimistic this is going to save a lot of resources because it does not add up that two telecommunication companies plant towers on the same hill for the same view. This is expensive for Malawi. I am happy that this is being addressed although outside the budget.
Q
: There are concerns that the budget has no potential to turn around the country’s economy and will only entrench poverty. What do you say?
A
: I agree, this budget has the potential to create more poverty than improving the economy. As said earlier, the budget is not strategic. It is more of consumption than improving the economy. Huge allocations and focus has gone on initiatives for consumption. This is not healthy for a country whose economy is staggering. Amidst problems, we still need the economy to grow.
Again, the budget is dependent on locally generated revenue and this means more taxes. So, if you look carefully, you will see that there are more chances to create more poverty than improving the situation and the reason as said earlier is that a big chunk has gone into consumption.
Q
: Many times governments use national budget to
achieve a political mile. But in this budget, we see government discarding political correctness in favour of what makes economic and public finance sense. For instance, decisions on Farm Input Subsidy Programme (Fisp) and cement and iron sheets subsidies. What do you think might have influenced the President to think his political standing is expendable against the country’s long-term financial sustainability?
A
: Government had no option on this looking at the economy and some of the challenges facing the country. It was necessary to adjust the budget and trim the beneficiaries list. This is welcome because there has been pressure for government to reform on Fisp to allow the beneficiaries contribute more and also government play its part. It is a good move.
Q
: Development partners and other local commentators have asked government to exercise prudence in financial management to make the budget more effective. What is your take?
A
: We really need to exercise prudence in financial management in all sectors of the economy and this culture has to be promoted from grass roots, including all sections of the government where we all think are minor ones. Some of the ways of doing things we adopted way back in 1994 cannot work today. Some of the proportions made cannot work today.
The other area that needs to be looked at seriously is on luxury expenditure. There is too much of luxury that siphons huge sums of money from the government coffers. Think of the vehicles that most government officials use. We cannot sustain such expenditures. You do not see such nonsense luxuries in United Kingdom [UK] and this is what we always preach. We need to spend within limits. Why do we have this obsession with that kind of luxury in this poor country? The VX vehicles consume huge amounts of fuel and are expensive to sustain. What are they for? We can do without them. So, we can start talking financial prudence if we start from addressing the so-thought to be small things such as these. They are not small at all to me, they are big and I urge government to prioritise them in cutting costs.
Q
: Parliamentarians have gone into clusters to scrutinise the budget. Which areas do you think need serious scrutiny?
A
: These are issue I am talking about. They need to look at expenditures that do not make sense and chop them off. They should look critically into these so-called small and other related transactions. For instance, on fuel. Some of the proportions made in 1994 do not make sense today. It was said that almost 40 percent of the budget goes into these. We need to know how much is being spent on these expenditures now. Some will say it is little money, but for me these are important. I am happy government has asked ministries and departments to spend within limits, but we can cut more.
Q
: Any last comment?
A
: This budget is based on revenue collection and the question is, are we going to realise all that required money? What role should each of us play to achieve this. The private sector is the segment of the budget, but do they have the capacity to support that budget? This is a crucial issue and it is good question to raise now. There is always a limit on how you can tax people. n
