Malawi’s speedy economic recovery requires greater economic diversification across all sectors to expand the import substitution base to help push up local production.
The Malawi Economic Justice Network (Mejn), in its final summary of submissions for the 2012/13 budget, says most Malawians believe this could discourage importation of products which can be produced locally and, in a way, expand the country’s import base, at a time Malawians’ appetite for imports has jumped.
“The 2012/13 budget is being developed against the backdrop of major tides against the Malawi economy. The global financial crisis and Malawi’s worst ever economic downturn, and the transition and change in the government administration, all of which continue to make it tricky for the next budget with the huge expectations by the general public for immediate restoration of the economy in the shortest possible time,†said Mejn in the summary.
According to Mejn, the summary is a culmination district pre-budget consultations in 15 districts involving interface meetings with district council officials, members of Area Development Committees (ADCs), civil society representatives and traditional authorities.
The summary says the issues are the proposals for consideration in the next budget by the Ministry of Finance both from the citizens and from the councils’ perspectives.
The identification of these issues is guided by the civil society’s quest to contribute towards fostering improved and equitable provision and access to economic opportunities and social services by Malawians, according to Dalitso Kubalasa, Mejn executive director.
“These submissions are thus geared at providing the Ministry of Finance with insights and feedback for effective policy direction with key pointers in need of critical attention, mindful of the challenges besetting Malawi in the current fiscal year, with the zero-deficit budget (ZBD).
“This is against the belief that for Malawi to realise pro-poor growth, citizens themselves have to be involved in the decisions regarding the prioritisation of development policy programmes,†says the summary signed by Kubalasa.
Taxation
On taxation, Malawians want tax reform measures to be efficient in minimising distortion impact on resource allocation and investment decision-making by the private sector.
“Tax reform measures should always be used to encourage local investment and reinvestment of business profits and attract foreign direct investment to identified economic activities,†says Mejn.
In the midst of the current economic climate, it is expected that companies would be downsizing and retrenching staff and, at the same time, not increasing employment opportunities, at least in the short term, as the effects of the 49 percent devaluation of the kwacha and the ensuing economic downturn transition.
Pay As You Earn
In this vein, Mejn says Pay As You Earn (Paye) tax should be aligned to the poverty line, while there should also be a removal or revision of some of the punitive taxes introduced with the ZDB.
“To ensure that the Paye tax-free band really serves the purpose in beefing up the needs of the poor, government should not focus on the revenue loss of increasing the tax-free band in line with rising costs of living, but rather focus on meeting the requirements of the poor in the circumstances,†observes the summary.
Malawians, in their submissions, recommended that the minimum threshold for Paye tax be adjusted upward to about K26 000 from the current K12 000 commensurate with the increase in cost of living but also to allow citizens more disposable income, said Mejn.
In their submission at a recent pre-budget consultation in Blantyre, the Society for Accountants of Malawi (Socam) also recommended the increase in the tax-free band to K25 000.
Blackouts, VAT
Other measures Malawians want are the improvement of the business competitiveness in Malawi by minimising electricity blackouts and transportation costs for internationally traded products.
Mejn says value added tax (VAT) on banking services effected this year is confusing because government and the Malawi Revenue Authority (MRA) are dwelling on informing the public the services that will be tax exempt, but do not explain the services that will not attract VAT.
