Some budget provisions need rethink
Reactions have been varied to the K1.7 trillion 2019/20 National Budget Minister of Finance, Economic Planning and Development Joseph Mwanamvekha presented in Parliament on Monday this week.
Economists and some development partners The Nation sought instant reactions from on the Budget Statement generally described the financial plan as “cautious”.
National budgets or expenditure plans play a critical role in fostering economic prosperity and eradicating or reducing poverty in a country. It is mostly through national budgets that governments implement their development plans.
In recent years, Malawi’s national budgets have predominantly been skewed towards consumption with recurrent expenditures taking up the bulk of the resources. This year is no different as K1.3 trillion is earmarked for recurrent expenditures and K437.9 billion or seven percent of the gross domestic product (GDP) is the provision for the development budget. Paltry as it may appear, the seven percent is an improvement from previous budgets which had the development allocation hovering between three and five percent of GDP.
Typical of any plan, Mwanamvekha’s maiden national budget has winners and losers. For instance, low income earners and domestic workers as well as other unskilled labourers are among the winners. In case of domestic workers and others, the minimum wage has gone up to K35 000 from about K25 000 per month while the tax-free pay as you earn (Paye) bracket has increased from K35 000 to K45 000.
Environmental protection has also received a boost in the budget with the removal of 16.5 percent value added tax (VAT) on solar panels, and related accessories as well as energy efficient bulbs, liquefied petroleum gas and gas cylinders to ensure wider and affordable access to clean energy sources.
Further, the budget also outlines measures geared at reducing the debt stock and indeed the budget deficit. However, when all is said and done, the bottomline remains that successful implementation of the national budget lies in a practical fight against corruption which drains about 30 percent of the resources approved in the budget.
The proposed national budget currently under scrutiny by members of Parliament (MPs) through their respective clusters has also stirred debate, especially relating to some provisions, notably the allocation of K1.6 billion for the construction of stadiums for two privately-owned football clubs—Nyasa Big Bullets and Be Forward Wanderers.
If truth be told, the two clubs are not State entities to benefit from public resources. They are private outfits run as profit-making entities and, above all, with sound sponsorship. I had no problem when President Peter Mutharika promised during the campaign trail to build the two teams stadiums. However, to force taxpayers to finance the projects is asking for too much.
It is hypocritical that while the two clubs, which enjoy good sponsorship, are drawing from public coffers, the Malawi national netball team, the Queens, ranked sixth in the world, continues to struggle to get resources. Since Bingu era, we have been waiting for the netball complex, the standard worldwide.
Surely, there are better ways to spend K1.6 billion than building stadiums for private entities. It is my humble plea to legislators to reject this allocation.
The proposed introduction of one percent withholding tax on non-bank mobile money transactions based on the transaction amount is another area of concern. The justification in the budget statement is that the measure “aims at ensuring that a large number of the citizenry are motivated to contribute towards national building through payment of taxes…”
In the first place, the justification is vague as, for all we know, the key players in the mobile money business, Airtel Malawi and TNM plc are loyal taxpayers; hence, they contribute to the national development.
What the measure will achieve is to erode the gains made towards financial inclusion through mobile money.
In Malawi, the formal financial institutions, mostly the banks and insurance firms, are yet to make a breakthrough to bring on board as many people as possible. For instance, insurance penetration remains low at a miserable three out of every 100 while only about 20 in every 100 people have bank accounts.
Financial inclusion’s key objective is to improve the range, quality and availability of financial services and products to the unbanked, under-served and financially-excluded sections of society.
It is a fact that mobile money is the in-thing. It is the future of banking. Many of us have seen how TNM Mpamba and Airtel Money have grown over the years and simplified money transfers and payments. Today, TNM Mpamba and Airtel Money, collectively, have at least K15 billion in deposits in banks at any given time. The funds are currently kept using the Trust Laws
Whereas the formal banking sector has two million bank accounts, mobile money collectively boasts of at least 4.6 million subscribers on TNM Mpamba, Airtel Money and Zoona.
Now, to imagine that for every K100 000 one sends through mobile money they have to pay K1 000 tax is really unwarranted.
Formal banks are not as widely represented as mobile money agents.
In Uganda, a similar taxwas trimmed to 0.5 percent earlier this year by legislators. I am positive our MPs will widely research and find a way forward.
