Budget is stillborn, needs fresh start

When Minister of Finance and Economic Affairs Sosten Gwengwe tabled the proposed 2023/24 National Budget in Parliament, he was upbeat that based on the situation on the ground, the fiscal plan would deliver.

The expectation was that the budget would help the country resuscitate its economy battling for life in the intensive care unit.

Based on the factors on the ground, the underlying assumptions were that real gross domestic product (GDP) would grow by 2.7 percent in 2023 and rise to 3.2 in 2024. Inflation rate, another key variable, was projected to average 17.9 percent during the fiscal year while the policy rate of 18 percent was envisaged.

Boom, came Tropical Cyclone Freddy on the weekend of March 10 extending to Tuesday March 14 which disintegrated the fiscal plan, just like that.

It is little wonder that the minister this week revised the budget downwards from K3.872 trillion to K3.789 trillion as macroeconomic assumptions underpinning the financial plan will have to be revised.

But reducing the budget value downwards is not everything. There is still more that needs to be done to make things happen. It is unfortunate that the budget is leaning more on consumption than on boosting productive sectors contrary to the Budget Statement theme of ‘Sacrificing today for a better tomorrow: Regaining macroeconomic stability and growth through collective responsibility for our shared future’.

Parliament was from yesterday scheduled to go into the Committee of Supply, a stage where legislators consider vote by vote and make cuts where necessary or make upward adjustments to initial allocations. My plea to members of Parliament, especially those belonging to the Budget and Finance Committee, is to ensure that spending in social sectors such as education and health should be prioritised through increased allocations. It does not make sense in times of crisis to increase by 65 percent allocations to State Residences, the Judiciary, Ministry of Foreign Affairs and security agencies while giving “bare bones” to education, health and indeed governance institutions.

Even before Tropical Cyclone Freddy hit, the formulation of the budget set to roll out on April 1 already left a lot to be desired and reflected a mismatch between policy pronouncements and resource allocation. What one gets is that the Tonse Alliance-led administration’s seriousness to achieving goals outlined in Malawi 2063, the country’s long-term development strategy, and its first 10-year implementation plan ending in 2030, is lacking. If anything, the pronouncements are almost zero.

Desperate introduction of a 40 percent corporate tax for commercial banks making profits above K10 billion are not necessary. The revenue projected to be raised through the discriminatory tax regime can be had by properly juggling the allocations to existing votes.

Crisis times require walking the talk on cost-cutting and not increasing luxuries to the ruling elite and their cronies at the expense of funding to social and productive sectors.

It does not reflect seriousness to have just about K900 billion, an equivalent of 5.9 percent of GDP allocated for development expenditure, while the rest of the K3.7 trillion purse is for recurrent expenditure.

Reserve Bank of Malawi (RBM) has painted a gloomy picture on the country’s economic prospects due to the impact of Tropical Cyclone Freddy. The bank also said the pressure on foreign reserves and exchange rate are expected to remain a risk in the short to medium term.

Instead of waiting for the Mid-Year Budget Review, it would help the Minister of Finance and Economic Affairs to abandon the proposed fiscal plan and devise a provisional  national budget covering three months while working on a comprehensive review given the new realities on the ground.

Through national budgets, governments the world over implement their development plans to foster economic prosperity as well as eradicate or reduce poverty. The budgets represent a contract between a government and its citizens.

If the Tonse Alliance is to inspire hope as did Moses who in Exodus 14:13 assured the Israelites to “stand firm and you will see the deliverance the Lord will bring you today. The Egyptians you see today you will never see again”, total overhaul of the budget is the way to go.

A budget is more than just a series of numbers on a page. It is a contract and an embodiment of our values.

If we choose to just present or pass for the sake of it, posterity will judge us and we will remain where we are.