If hints from Minister of Finance, Economic Planning and Development Goodall Gondwe are anything to go by, there won’t be a change in the sum value of the 2017/18 National Budget as he will stick to the K1.2 trillion like the current financial plan.
During Pre-budget Consultation Meetings, Goodall and his team got input from all and sundry.
Key among the input were proposals to widen the tax-free income band from the current K20 000. Pay As You Earn (Paye) under which the tax-free band exists is one major source of tax revenue by the public tax collector, the Malawi Revenue Authority (MRA).
Each year, during Pre-budget Consultation Meetings, proposals to have the tax-free band increased are tabled. But Gondwe and his predecessors have always asked the proposers to indicate where resources to fill the gap created by the foregone revenue steam will come from.
Proponents of the increase in the tax-free band argue that such a revision would help redistribute income as a contribution to the reduction of the growing dangerous divide. But that is not entirely true as the high income earners, at the end of the day, will also benefit, in fact, in an even bigger way than the low income earners.
Pre-budget Consultation Meetings have also come under fire from stakeholders who feel they are mere road shows or talking shops as most of their input is not considered.
It remains to be seen whether Goodall will include some of the input. For instance, the Economics Association of Malawi (Ecama) proposed a budget that focuses on financing private sector-driven inclusive sustainable growth. Ecama observed that previous budgets focused more on social services.
The minister will be presenting his budget against a background of lowering inflation rate currently at 14.6 percent as of April 2017 according to the National Statistical Office (NSO) and the bank rate—the rate at which commercial banks borrow from the central bank as lender of last resort—is at 22 percent.
Further, Goodall will also be tabling the budget at a time the World Bank has announced an $80 million (about K60 billion) general budget support package to Malawi after four years of suspension. Ordinarily, this news should be a cause for celebration in a country that has struggled to finance its budget using domestic resources after development partners withdrew their estimated 40 percent budget support on the recurrent side in 2013 due to concerns about abuse of funds.
However, there is still a lot to be done to win back the trust and confidence of most of the developments partners.
How will Goodall finance his budget? Clarity on the source of funds for the budget is critical; otherwise, Malawians have every reason to get worried if the source of the resources are not available. It does not make sense to spend your money before you earn it.
For now, I will take a wait-and-see approach as the minister finalises his budget pending presentation in Parliament tomorrow. n