‘Fiscal, monetary policies need to be aligned’

Stakeholders to the 2013/14 pre-budget consultations have called for the need for government to ensure that there is an alignment between the fiscal and monetary policies in the country to ensure economic development.

The Economics Association of Malawi (Ecama) and the Malawi Economic Justice Network (Mejn) organised the summit to undertake consultations to supplement the 2013/14 budget.

One of the stakeholders to the summit, Ian Bonongwe, argued that such an alignment would form an anchor of what the country would like to achieve from the Economic Recovery Plan (ERP).

“We talk a lot about private sector being an engine for economic growth. In the 2013/14 budget, we need to come up with quick fixes to the private sector because that is where wealth generation begins,” said Bonongwe.

In relation to that, Society of Accountants in Malawi (Socam) chief executive officer (CEO) Evelyn Mwapasa pointed out the need for government to look into the effects taxes are having on businesses in the country considering the multiplier effect that such effects have on society.

A case in point was Malawi Distilleries Limited which faces closure because it has been slapped with exorbitant interest rates.

“Malawi Revenue Authority [MRA] is slowly killing the organisation because they keep on increasing the excise duty on the sachets of alcohol, which results in loss of volumes and therefore reduced profits. “Our appeal is for government to take a second look at the excise duty which presently stands at 250 percent. We are making K200 million (about $500 000) loss because we cannot afford to sell at the current duty rates,” argued Abel Chanje, Carlsberg Malawi CEO.

Mwapasa argued that if companies are closing down because of overtaxing, it brings about a multiplier effect; government loses out on revenue collection among other things, and people lose jobs.

Reserve Bank of Malawi (RBM) deputy governor, Naomi Ngwira, however, pointed out that the current monetary policies are only temporary measures and are not there to squeeze the economy.

She said they are there to ensure financial stability so that the inflation does not continue on an upward spiral.

Commercial banks in the country have for the past week been adjusting base lending rates from an average of 37 percent to around 43 percent although the RBM has kept the bank rate constant at 25 percent.

Stakeholders to the summit also advised on the need to ensure that the National Export Strategy (NES), Malawi Growth and Development Strategy (MGDS) and ERP are matched with the 2013/14 budget.

Ecama executive director Nelson Mkandawire said the organisation would summarise the key issues presented at the summit and take them to Ministry of Finance so that they are taken on board in the 2013/14 budget.