Budget focus on recovery

Minister of Finance and Economic Affairs Simplex Chithyola Banda says the 2024/25 fiscal plan will focus on recovery and cushioning the economy from the effects of policy changes the government has implemented.

Speaking yesterday during his first 2024/25 Pre-Budget Consultation Meeting in Blantyre, the minister conceded that the country’s economy has been grappling with a number of challenges which resulted in a lot of imbalances and threatened the implementation of the country’s long-term development agenda.

He said: “The budget remains an important tool in fostering economic prosperity and eradicating poverty, especially in times like these when the economy is experiencing various challenges.

“The 2024-25 Budget will be formulated with optimism.”

Chithyola Banda said implementation of the Malawi 2063 (MW2063) and its First 10 Year Implementation Plan (MIP-1) required government to make tough choices today to ensure that the imbalances existing in the economy are addressed.

He said: “Not only did we qualify for the International Monetary Fund [IMF]’s $175 million Extended Credit Facility [ECF], but also the resumption of direct budget support which hasn’t been the case for the past 10 years or so.

“And as we are talking today, there are indications that direct budget support will continue even in the fiscal year 2024/25.”

The minister said government, under the ECF, will implement structural reforms and prudent macro-economic (fiscal, monetary and exchange rate) policies and debt restructuring.

Among others, government devalued the kwacha by 44 percent in November 2023 as a pre-condition of the ECF.

This was hoped to help monetary authorities ease foreign exchange scarcity in the country.

However, following the devaluation, there have been increases in prices of fuel, electricity and other basic items, which has since caused inflation to spiral to 33.1 percent as at November 2023.

The ECF aims to support the authorities’ commitment to restore macroeconomic stability, build a foundation for inclusive and sustainable growth, including strengthening resilience to climate-related shocks and address weaknesses in governance and institutions.

The arrangement is also expected to catalyse grant financing and capital inflows, including foreign direct investment and trade credit.

In an interview yesterday on the sidelines of the consultation meeting, National Planning Commission (NPC) director general Thomas Chataghalala Munthali said while the ECF programme is catalysing the economy, it is not an end in itself.

He said what will be critical are the measures that will propel the business community to invest more and steer the economy.

Said Munthali: “We have largely managed not to reach the growth targets because of both exogenous and other shocks.

“There is need for us to grow and look at not just spending, but also generating resources and how we efficiently utilise them. We believe that if we link this to MW2063, we can make first 10-year targets in the execution of MW2063 of graduating the country into a low-income economy, at least, attainable.”

Despite strides made in putting in place the requisite institutional and policy frameworks for the effective and efficient implementation of the development plan, implementation of the first 10-year targets in the execution of MW2063 has been slow.

In its NPC 2023 Annual Report published on Friday, the commission said  while implementation of about 80 percent of the interventions that were to start between 2021 and 2022 started, 60 percent of them were either off-track or are registering slow progress.

This was the case in all the three MW2063 pillars of agricultural productivity and commercialization, industrialisation and urbanisation, including the critical MW2063 enabler of ‘private sector dynamism’.

In the current financial year, the Treasury adjusted expenditures by K540 billion to K4.33 trillion. The 14.2 percent increase on the initial K3.79 trillion fiscal plan implemented from April 1 this year is largely meant to accommodate the social protection measures the government seeks to implement to cushion vulnerable sections of the population from the impact of the 44 percent kwacha devaluation.

Meanwhile, similar pre-budget engagements will be conducted in Lilongwe and Mzuzu on Wednesday and Friday, respectively.