Q & A

Mix-ups worry parley

Recently, Minister of Finance Goodal Gondwe presented his Mid-year Budget Statement in Parliament. Among others, he announced a K20 billion budget cut. FATSANI GUNYA sought the reaction of Rhino Chiphiko, the chairperson of the Budget and Finance Committee.

Recently, Minister of Finance Goodal Gondwe presented his Mid-year Budget Statement in Parliament. Among others, he announced a K20 billion budget cut. FATSANI GUNYA sought the reaction of Rhino Chiphiko, the chairperson of the Budget and Finance Committee.

Chiphiko: What do mixed figures say about Malawi?

The Minister of Finance was upbeat about the country’s economic  prospects. Is the economy likely to recover?

Actually, we noted mixed developments in four sectors which had to be brought to the attention of the minister. For instance, in the external sector, we have witnessed some stability in the exchange rate, but the balance of payment remains precarious. We are still importing more than we are exporting. With respect to the exchange rate, when we passed the budget in June 2016, one dollar was trading at K709. By December 2016, the dollar was trading at K725, signifying some marginal depreciation and relative stability in the six months. On the monetary side, the country has witnessed a marginal deceleration of inflation. When the House passed the budget in June last year, headline inflation stood at 22.6 percent and by December 2016, it had declined to 19.6 percent.

What is the major push for this trend?

The major driver of this inflation persistence has been food availability with food inflation remaining stubbornly high at 24.8 percent in December 2016 from 27.7 percent in June.

Who are the major losers and winners?

This decline in inflation has not benefitted the majority of our people to the extent that the main beneficiary has been the domestic banking industry since the policy rate was reduced by a token 3 percent to 24 percent. In view of this, the minister suggests that in the real sector, a genuine recovery is imminent.

However, we noted that the currency depreciation and a rebound in international petroleum products resulted in an increase in fuel prices.  Between June and December last year, petrol prices rose from K743.30 to K824 while diesel prices rose from K722.80 to K815.80. In the fiscal sector, budget execution remained weak. Although tax revenues exceeded the midyear target, inability to implement projects resulted in under spending and non-execution of project. As such the committee believes that such under-spending or under-funding has negative implications for public service delivery.

You once commended the minister for pronouncing reforms in the Fertiliser and Input Subsidy Programme (Fisp) in line with the suggestions from various sectors. Any headway?

Somehow, we are making  headway. But the committee has noted that some of the reforms that we applauded have not been implemented. First, there was the deafening silence in the Minister’s speech on the proposal to engage commercial farmers on contract with Government with a view to ensure food sufficiency and accessibility at affordable prices. When we visited Illovo Sugar Company in Nchalo, we noted  some disheartening news that government did not honour its contractual obligations by not paying Illovo K106million after the company had used its own resources to grow maize for the nation. Government deliberately frustrated Illovo to import the grain instead of sourcing it locally. When the Minister of Agriculture was asked about the situation, he answered that Illovo did not have the capacity to produce the needed tonnage and it turned out that Illovo had

the capacity at least to produce half of the maize that was supposed to be imported from Zambia. As we are all aware the end result is the “maizegate’.

Does the budget statement adequately address the issue of food insecurity which forced the country into the controversial importation of maize from Zambia?

As a committee, we observed that the causes of food shortages in Malawi are complex due to lapses in the government’s early warning systems and vulnerability assessments, distortions in domestic markets and mismanagement of food reserves. We noted with distress three areas of concern which needed to be highlighted with respect to the current on food insecurity and the botched attempt at food importation. They include the technical capacity issues on forecasting crop production and food insecurity, the apparent ambivalence within the Executive of the mandate of Admarc and NFRA and the threat of contingent liabilities that Admarc poses on the budget.

What do you mean?

In my statement in the House last May, I argued that the country’s early warning systems do not seem to work and there is need of urgent overhaul. Last year, the system did predict a maize shortfall. However, they relied on flawed agricultural statistics, which indicated that the shortfall would be more than compensated for by an increase in other food crops. This year, Malawi Vulnerability Assessment Committee (Mvac) over-predicted households that would be food insecure.  During the last budget sitting, our committee noted with alarm the contradictory information coming from the Executive on this food crisis. In his State-of-the-Nation Address, President Mutharika informed the nation that maize production had declined by 12.4 percent and that about 3 million people had been rendered food insecure. But in his Budget Statement, a week later, the Minister of Finance indicated that the country would require about 790 000 metric tonnes of relief food to support about 8.4 million people. At the time, we queried the minister to clarify whether we were dealing with three million or 8.4 million people. During the same period, Mvac revised the figure to 6.5million people who would require 1.07 million metric tonnes of maize. Now the question remains which one of the three figures provided can the minister appraise the House with?

And which one does your committee agree with?

It is disturbing to note that all these figures are coming from one source and yet there are all these discrepancies in millions. Still, in this review, the Minister of Finance has admitted to what my committee has already advised him about the lack of technical capacity in the Executive to forecast both weather and crop production. No wonder, he conceded that Mvac overestimated the food insecurity and Admarc does not need to import 400 000 metric tonnes of maize. Therefore, as a committee, we choose to agree with the figure that was presented by the President and consider the subsequent figures to be cooked by some invisible hand. But what does this say about us, as a nation in terms of fiscal discipline in the eyes of global financial meltdown?

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