Zero-deficit budget out—Lipenga

Minister of Finance Dr. Ken Lipenga has said it would be foolhardy to maintain the zero-deficit budget (ZDB) in the current changing economic environment.

The minister said this in an exclusive interview on Tuesday. He said government will return to the normal budgeting system this year.

Lipenga was reacting to concerns that Malawians will suffer a double blow—with 49 percent kwacha devaluation announced on Monday and punitive taxes put in place by the ZDB, former late president Bingu wa Mutharika’s brainchild towards economic independence after falling out with development partners due to governance concerns last year. Traditionally, donors supported the country’s national budget with resources estimated at 40 percent.

The Malawi Congress of Trade Unions (MCTU), the Human Rights Consultative Committee (HRCC) and some businesses earlier bemoaned the devaluation as it came without assured protection from its effects.

But Lipenga said government is aware of problems facing Malawians due to taxes and that it will work towards ensuring that people are protected from shocks. He said government’s focus is on implementing measures that will eliminate or minimise the impact of the devaluation.

Said Lipenga: “Let me state that the zero-deficit budget was not a bad idea per say, but the way it was implemented. It became unpopular because it was connected with the difficulties we were having with donors.

“We are now 100 percent certain that we will reach an agreement with IMF [the International Monetary Fund]. The budget we are working on now will have full support of donors. So, we will not have to use the zero-deficit [plan].”

MCTU secretary general Robert Mkwezalamba earlier said the union was disappointed with the devaluation as there was no assurance of protecting Malawians and the period it will take the economy to recover would cripple the people.

HRCC executive director Undule Mwakasungula also asked government to explain how Malawians will be protected and why the devaluation was effected. He said people have to be assured of money that is not attached to conditions for cushioning and the removal of the ZDB for good.

A Mzuzu businessperson, Dan Mhone, said the devaluation will affect businesses. He said prices of products will go up, thereby driving away customers.

Another entrepreneur, Judith Chibambo of J & A Fashions, also feared for customers’ welfare as the price of goods will go up. She said government should ease people’s burden by reviewing taxes.