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Home Columns Business Unpacked

Pre-budget consultations should strike a balance

by Aubrey Mchulu
15/04/2021
in Business Unpacked
3 min read
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This week, the Ministry of Finance announced that it will be seeking input from stakeholders for inclusion in the 2021/22 National Budget set to roll out from July 1.

Due to restrictions on public gatherings to a maximum of 50 as a Covid-19 precautionary measure, the pre-budget consultations will not be physical meetings; hence, stakeholders will be required to submit their written inputs to Treasury from April 9 to April 30 2021.

Further to the written submissions, Minister of Finance Felix Mlusu will conduct virtual meetings with budget stakeholders from April 20 to April 23.

Pre-budget consultations or dialogue are an essential part in the budget formulation process. Over the years, the exercise has become a tradition as it offers the Ministry of Finance to outline the next budget’s framework while at the same time getting input from stakeholders who comprise the business community, professional bodies, lobby groups and ordinary citizens.

National budgets as expenditure plans play a critical role in fostering economic prosperity and eradicating or reducing poverty.

But at the same time, some budget stakeholders have cried foul that Treasury seldom takes on board their budget inputs. Well, practically it is not possible for the Ministry of Finance to incorporate all the valuable input from the consultations, but it is also important that Treasury strikes a balance to avoid turning the exercise into some kind of a “road show” or “talking shop” where valuable ideas are presented without being implemented.

The Consumers Association of Malawi (Cama) and Employers Consultative Association (Ecam) expressed concern over the lack of consideration for the inputs. Of course, it is not a must that the input be considered, but ignoring the same defeats the whole purpose. In fact, it is a waste of everybody’s valuable time.

Given the economic impact of Covid-19, the next budget should surely focus on how productive sectors can be revitalised to stimulate the economy. Here what comes to mind are incentives for sectors such as tourism—which has been worst hit by the pandemic’s impact—and manufacturing.

In the Tonse Alliance and Mlusu’s maiden budget set to expire this June 30, the public had their wishes responded to when the zero-rated tax bracket for Pay As You Earn was expanded from K45 000 to K100 000 and the minimum wage revised from K35 000 to K50 000. But then one can also argue that the gesture may have generally been driven by political will as the new administration had promised the same in its pre-election manifesto.

Taxation has remained one sticky issue in the budget and the Institute of Chartered Accountants in Malawi (Icam) and its partners passionately prioritise the same every year.

On its part, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) often lobbies for a reduction and rationalisation of taxes to boost the productive capacity of businesses. The businesses want corporate taxes reduced from the current rate of 30 percent to attract more foreign direct investment.

In reality, though, Treasury faces a dilemma on taxation regarding whether to revise downwards the corporate as well as value-added tax amid dwindling collections by the Malawi Revenue Authority (MRA) largely due to a slowdown in economic activity.

Moving forward, Treasury faces should strive to strike a balance between taking on board input from stakeholders and developing a realistic budget that takes into consideration realities on the ground. It does not send a good message to have a budget that is nothing but a mere “wish-list” which, during Mid-Year Budget Review will be dismantled.

National budgets work better where they are “owned” by the public. It is, thus, my sincere hope that the forthcoming budget will resonate with the wishes of the public.

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