National budget should stimulate economy, growth

From February 9 to April 5 2024, Parliament will start meeting in Lilongwe for the Budget Meeting to debate and pass the 2024/25 National Budget, the country’s fiscal plan.

Minister of Finance and Economic affairs Simplex Chithyola Banda, like his predecessors, will be the face of the national fiscal plan that can either help the country swim or sink in its pursuit for economic recovery.

In the meantime, the minister and his team from Treasury are on the road soliciting input from various players, including the business community, academia, economists and the public in general on what should be included in the financial plan.

During the consultation meetings held in Blantyre, Lilongwe and Mzuzu, the Minister of Finance hinted that the 2024/25 fiscal plan will focus on recovery and cushioning the economy from the effects of policy changes implemented in recent years. He acknowledged that the economy is grappling with several challenges that have created imbalances that threaten the implementation of Malawi 2063 (MW2063), the country’s long-term development agenda.

National budgets or the expenditure plans play a critical role in fostering economic prosperity and eradicating or reducing poverty. It is through the national budgets that governments implement their development plans.

Through the MW2063, Malawi seeks to be a lower middle-income economy by 2030, six years from now and a middle-income country by 2063. To achieve the aspirations, the economy needs to grow by at least six percent annually and this can be realised not just through consumption, but emphasising on generating resources and ensuring that they are used efficiently.

It has been a rough ride for the Malawi economy with external debt costs rising by 87 percent in five years from $54 million (about K92 billion) in 2018 to $101 million (about K171 billion) in 2022. The debt burden is one of the huge burdens to stimulating the economy as colossal resources are being channelled towards servicing the debts at the expense of productive sectors.

There is a flicker of hope in the next budget as the securing of the International Monetary Fund (IMF) four-year Extended Credit Facility (ECF) worth $175 million, to be disbursed in four tranches, appears to have unlocked prospects of direct budget support from development partners. What will be key, though, is prudence in the use of the resources so to come.

In its 2023 Annual Report published, the National Planning Commission, the implementing agency for MW2063, said implementation of about 80 percent of the interventions that were to start between 2021 and 2022 started with 60 percent of them either off-track or registering very slow progress across the three pillars of agricultural productivity and commercialisation, industrialisation and urbanisation.

Having been on the route before where Ministers of Finance have promised to do “business unusual” to stimulate growth and unleash the economy’s potential through creation of enabling environment for businesses to thrive, I am curious to see how Chithyola Banda will do it.

The budget is also coming at a time Malawi is classified as a country in debt stress with total public debt stock at $8.69 billion (K14.7 trillion), representing 76 percent of the gross domestic product, according to IMF data. Of the debt stock, $4 billion (about K6.8 trillion) was external debt and $4.69 billion (about K7.9 trillion) domestic debt.

I know practically it is not practical and possible to accommodate all input from the consultations, but I have always felt that the Ministry of Finance and Economic Affairs would do the stakeholders justice if it is seen to be taking on board some of their suggestions from the consultations.

Finally, there has been a growing trend where the national budget as approved by Parliament is virtually dismantled during the Mid-Year Budget Review due to factors such as lower than projected revenue collections.

I look forward to a national budget that will be more production-oriented than consumptive to stimulate economic growth.