Minister of Finance, Economic Planning and Development Goodall Gondwe’s proposed revised national budget yesterday faced scrutiny from opposition political parties in Parliament which advanced solutions to the ailing economy.
Specifically, People’s Party (PP), the former governing party between April 2012 and May 2014, described Gondwe’s proposed revision of the budget from K929 billion to K906 billion as a wrong reflection in real value in the wake of the rate at which the kwacha has depreciated against the dollar since the national budget was passed in July 2015.
On its part, Malawi Congress Party (MCP) through its spokesperson on finance Luke Kusamba-dzzi blamed the country’s worsening economic woes on poor management of the monetary policy by the Reserve Bank of Malawi (RBM).
It was Kusamba-Dzonzi’s conviction that Malawi being more of a consumer than a producer, the monetary policy had unintended consequences on the economy.
He said as a result, Gondwe’s proposal to revise the budget downwards would not leave Malawi with an annual budget of K906 billion, but just below K500 billion.
Kusamba-Dzonzi said this was because Malawi earns in the local currency, the kwacha, but spends in dollars.
He explained that the monetary policy had made raw materials expensive and increased the cost of production.
Kusamba-Dzonzi said a producer faced with rising costs of production would be forced either to reduce production or increase prices of his products which would lead to less money for the producer and less taxes for the government.
In a statement that sounded like an Economics 101 lecture, he said: “Quite naturally, Mr. Speaker, Sir, it would be naive to expect this DPP [Democratic Progressive Party] led government to meet its financial obligations under the current budget when in truth it cannot keep its value in real terms.
“It is a fact that the Government of Malawi earns in Malawi kwacha, but largely spends in dollars on Fisp [Farm Input Subsidy Programme], procurement of medicines, fuel, tooth picks, cutex [nail polish], mesh and motor vehicles.”
MCP proposed that Gondwe should find a way of controlling off budget financial resources from donors, resuscitate the production sector with tangible economic interventions such as revitalising Optichem and empowering pharmaceutical companies to reduce imports on drugs and fertiliser.
PP spokesperson on finance Ralph Jooma said Gondwe should be worried that domestic revenues have underperformed by K12 billion and import duty by K3 billion.
“This is a strange outturn considering that devaluation pushes import tax revenues upwards. But if it is a sign that importation itself has dwindled then we should expect even much less taxes on income next year,” he said.
Jooma, a former minister of Economic Planning and Development during the Joyce Banda administration, also bemoaned the downward revision of the budget allocated to buy maize from K15 billion to K8.5 billion at a time when the country will have inadequate maize to take Malawians to the next harvest.
Gondwe is expected to respond to the remarks on his revised budget next Monday.
In October last year, the International Monetary Fund (IMF) asked Malawi to revise its budget downwards to reflect economic realities on the ground.