Domestic revenue target unrealistic—Experts
There is some doubt from economic commentators that Treasury will meet its domestic revenue target of K980 billion in the 2017/18 fiscal year despite Minister of Finance Goodall Gondwe’s optimism that tax collection will normalise in the second half.
In an interview yesterday, Salim Mapila, an economist at the pan-African policy think tank African Institute for Development Policy (Afidep), said there is a lot of uncertainty surrounding whether or not improved electricity supply will automatically translate into revenue increase.
“We should be mindful that the cost of this extra electricity supply is being borne by the consumers.
“As such, this will affect the profitability of the private sector and; hence, affecting tax revenue. So the future is still blurry economically,” he said.
From the half-year (July to December) target of K490 billion, Malawi Revenue Authority (MRA) under-collected by K38.1 billion, largely attributed to bad economic performance characterised by prolonged power outages.
But Gondwe believes tax collection will normalise inthe second half (January to June) of this fiscal year and yield roughly K70 billion more than was collected in the first half of the year, due to measures that will eliminate power outages.
In a separate interview, economics professor at Chancellor College Ben Kaluwa said while the minister needs to be hopeful, it is important to understand that companies cannot just adjust overnight as they also are yet to recover from the time lost in production during the first half.
Economics Association of Malawi (Ecama) executive director Maleka Thula thinks it would be difficult to achieve such target given the continued power outages.
“The pass-through effects of power outages will also have a bearing on overall performance of the economy going forward. Given the aforementioned, realisation of revenue target remains somehow uncertain,” he said.
Dean of social sciences at the Catholic University Gilbert Kachamba, on the other hand, said chances of achieving the target are minimal as electricity supply has not stabilised and it will take time for firms to recover from the energy shock.
Besides that, he said MRA is not explaining how it will address tax evasion and corruption which are the major contributing factors to underperformance in terms of tax collection.
However, IMF Resident representative Jack Ree said the performance of revenue in the second half will depend on economic growth, speed of the restoration of the power generation and the trend of customs revenue, among other things.
As part of measures to deal with the power deficit, Electricity Supply Corporation of Malawi (Escom) installed 55 megawatts (MW) diesel-powered generators in Blantyre, in addition to the 20MW already installed in Lilongwe
Another 23MW-generator will also be installed at Chinyamba in the Central Region district of Kasungu.
