The Economics Association of Malawi (Ecama) says implementation of the K1.29 trillion National Budget Minister of Finance, Economic Planning and Development Goodall Gondwe unveiled in Parliament last Friday will be a challenge as there is no medium-term strategy to guide it.
Ecama president Henry Kachaje said this yesterday in Lilongwe on the sidelines of the national budget analysis
breakfast organised by NBS Bank.
He told Business News that some of the priorities in the budget are upside down.
He said: “This budget is good, but not radical and transformative enough as it is not being guided by a national medium-term strategy. What we have seen is an increase of resources in other sectors, but as an industry we could have loved if more resources were channelled to the energy sector because energy is crucial to development.”
Malawi development priorities have in the past been driven by the Malawi Growth and Development Strategy (MGDS).
According to Kachaje, after the expiry of the MGDS II in June 2016, the country should have had another strategy in place so as to convince critics that the projected seven percent gross domestic product (GDP) government believes will be achieved in the subsequent years will be feasible.
“It is surprising that government is saying that it will grow the economy by seven percent and yet we do not have a strategy. If we failed to grow the economy by five percent with a strategy in
place, how is this feasible?
“We should have learnt some lessons from our previous challenges and make corrections, but if you go out again and start budgeting without a medium-term planning framework then we are not being serious [as a nation],” said Kachaje.
In his contribution during the panel discussion, Institute of Chartered Accountants in Malawi (Icam) chairperson of taxation committee, Andrew Chioko, noted that some of the inputs provided to the government during the pre-budget consultation meetings in February and March this year was not taken on board.
He said, among others, the proposal to removal of Value Added Tax (VAT) on water as well as increase the tax-free band from K20 000 to K50 000 have not been considered.
Government has, however, adjusted the Pay as You Earn tax free band from K20 000 to K30 000.
Another member of Icam’s tax committee, Audrey Mwala, wondered how Malawi will grow its economy by seven percent and yet most of the economies in Common Market for Eastern and Southern Africa (Comesa) region the economy will grow between three and four percent.
During his 2017/18 Budget Statement presentation in Parliament on Friday, Gondwe told lawmakers that according to the International Monetary Fund (IMF), global economic growth rose from 3.1 percent in 2016 to 3.4 percent in 2017 and it is projected to continue to grow by 3.6 percent in 2018; reflecting a strong economic rebound in advanced economies and a marked pickup of economic activity in emerging and developing economies.
He said: “For emerging and developing countries, growth is expected to remain strong in China, India and many other commodity importers. Malawi stands to gain from these developments if it positions itself appropriately, by producing quality tradeable goods that are expected to be in demand worldwide.”
Gondwe said government will continue to encourage the private sector to take advantage of these global trends. In particular it intends to push the production of legumes and cotton and the development of a thriving system of marketing for these commodities.
Over the years, fiscal and monetary authorities have missed their envisaged GDP growth rate. For instance, last year, authorities projected the economy will expand by 5.1 percent, but it ended up growing by 2.9 percent. n