Minister of Finance Felix Mlusu has effected a K5.5 billion upward adjustment to the proposed K1.9 trillion 2021/22 National Budget in a move an economist says defies economic realities on the ground.
In his speech winding up debate on the proposed budget in Parliament yesterday, the minister said he made the adjustments in consideration of reports from all political party spokespersons on Finance, Budget and Finance Committee of Parliament, budget cluster committees and contributions by individual members of Parliament (MPs).
Effectively, the development will push the budget from K1 993 337 000 000 to K1 998 837 000 000 for the nine-month financial year to run from July 1 2021 to March 31 2022.
There are 17 adjustments key of which include an additional K2.8 billion to the National Assembly vote for its operations and oversight functions, additional K500 million to the Office of the Vice-President for the procurement of motor vehicles, additional K394.3 million to the Directorate of Public Prosecutions for prosecution of cases and additional K300 million to Malawi Electoral Commission for the constituency and ward demarcation exercise.
There is also an additional K218.0 million allocated to the delinked universities to meet the cost of university councils and delinking task force while additional K157 million has been extended to National Local Government Committee for operations and K120 million to the Registrar General for enhancement of revenue collection.
Mlusu said: “Madam Speaker, it should, however, be noted that these adjustments have resulted in an increase in the deficit by about K5.5 billion since the increases have no corresponding increase in revenues.”
The new budget, framed at the height of subdued economic activity due to the impactof the Covid-19 pandemic, projects a K1.1 trillion revenue; hence, creating a budget deficit of K718.3 billion or seven percent of the rebased gross domestic product (GDP) during the budget initial design framework.
In its instant reaction to the budget after Mlusu had tabled it on May 28 2021, the Budget and Finance Committee of Parliament cast doubt on whether the projected domestic revenue targets would really be achieved.
But sounding optimistic yesterday, the minister said revenue measures the Tonse Alliance administration is putting in place have already started bearing fruits.
He said the Malawi Revenue Authority (MRA) was on course to surpass its revenue target for the 2020/21 financial year few days to the close of the fiscal year on June 30.
However, the adjustment yesterday also pushed up the budget deficit from K718.3 to K723.8 billion.
At 723.8 billion, the budget deficit is the second highest in the country’s history, in nominal terms, as the K2.3 trillion Tonse administration maiden budget has a yawning deficit of K811 billion or 8.8 percent of GDP.
Making general responses to the comments in the House, Mlusu dismissed the assertion that the 2021/22 Budget is a consumptive fiscal plan, saying it is rather developmental.
The allocation towards development expenditure in the 2021/22 Budget, at K570.8billion or 5.6 percent of the K8.1 trillion of the rebased GDP, exceeds 25 percent threshold.
A national budget is said to have features of a development financial plan if the allocation towards development as a percentage of the total budget exceeds 25 percent, according to development economists.
Rough calculations show that development expenditure as a percentage of the revised K1.99 trillion budget accounts for 29 percent, a rate Mlusu described as the highest in the past six years.
The minister also described as “faulty and misleading” the analysis that the budget is misaligned to the Malawi 2063, the country’s new long-term development plan launched in January 2021.
He said: “In order to have a correct picture of how the budget has been aligned to the Malawi 2063, there is need to also look at the amount allocated to the enablers and not only the pillars.”
Mlusu also succumbed to the pressure exerted by the Cluster on Agriculture and Natural Resources to increase the allocation for the purchase of maize and other produce by State grain trader, Agricultural Development and Marketing Corporation (Admarc), saying: “I am pleased to inform the House that arrangements have been made to ensure that Admarc has the required finance of K95 billion for the purchase of maize and other crops…”
In an interview yesterday to react to Mlusu’s new arithmetic in the budget, economist Milward Tobias said the adjustments show the “gravity of discrepancy” between what ministries, departments and agencies need against the ceilings they receive which form their budgets.
In a separate interview, opposition Democratic Progressive Party (DPP) spokesperson on Finance matters in Parliament, Joseph Mwanamvekha, said he did not expect something different from Mlusu besides defending the budget.
He said: “Surprisingly, he managed to justify some measures in the budget.”
Mwanamvekha, who served as minister of Finance in the DPP administration, said the secret of a good budget is manifested through sound implementation of the same budget to transform lives of Malawians.