Time to formulate realistic national budget
This week, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha and his budget team are seeking input from the public on what should be included in the 2019/20 National Budget set to be tabled in Parliament in September.
Currently, the country is running on a provisional budget of K511 billion covering four months from July to October. Treasury pushed through Parliament a provisional budget to ensure continuity of government business after the budgeting process was disrupted by the May 21 Tripartite Elections.
From Mwanamvekha’s speech during the first leg of Pre-budget Consultation Meetings in Lilongwe on Tuesday, the next budget will hinge on promoting both domestic and foreign investments while strengthening prudent fiscal discipline.
In his address, the minister bragged that the next budget will strive to give the nation “value for money”.
Well, I can’t wait to see how he will do it. Many of his predecessors made similar promises but, at the end of the day, it was business as usual. They have all screamed “fiscal discipline”, “expenditure controls” and the like, but the opposite happened as government ministries, departments and agencies (MDAs) continue to make it a habit to spend beyond their limits.
The next budget is also coming at a time public debt is on the rise and now pegged at $4.3 billion (about K3.2 trillion) or 68 percent of the gross domestic product (GDP). The stock comprises domestic debt of $2.2 billion (about K1.6 trillion) or 34.9 percent of GDP and external debt at $2.1 billion (about K1.5 trillion) or 33 percent of GDP.
The previous budget that expired on June 30 was also riddled with deficits that led to compromised service delivery in sectors such as health, education and infrastructure development. What happened is that the clock ticked, but services suffered as, for instance, people could not find essential drugs in public hospitals or indeed some public schools lacked adequate learning and teaching materials.
During the Lilongwe leg of the pre-budget consultations, calls for a review of the tax regime resurfaced. Some even lobbied for the removal of value-added tax (VAT) on piped water, electricity and bread.
While it is not practical and possible to accommodate all input from the consultations, I have always felt that the Ministry of Finance, Economic Planning and Development would do the stakeholders justice if it is seen to be accommodating some of their suggestions.
Take taxation, for example, which is always a sticky issue in the budget and the Institute of Chartered Accountants in Malawi (Icam) and its partners prioritise the same year in and year out.
During last year’s consultations, Icam expressed concern that for over four years, Treasury ignored its input.
In its earlier input, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) proposed a reduction and rationalisation of taxes to boost the productive capacity of businesses. It argued that neighbouring countries were pondering reducing corporate taxes to attract more foreign direct investment (FDI).
At all cost, Treasury should avoid portraying a picture that Pre-Budget Consultation Meetings are some kind of “road show” or “talking shop” where brilliant ideas are presented, but not implemented.
In recent years, I have observed a trend where the national budget as approved by Parliament is virtually dismantled during the Mid-Year Budget Review every February. Key factors have included lower than projected revenue collections.
National budgets or the expenditure plan play a critical role in fostering economic prosperity and eradicating or reducing poverty. Through the national budgets, governments implement their development plans. While soliciting input and formulating the next budget, all eyes will be on the Minister of Finance and his team to see if, for once, the country will produce a realistic budget that will
