When the budget is but a wish-list

For the fifth and final time in the 2014 to 2019 term of office, Minister of Finance, Economic Planning and Development Goodall Gondwe presented government’s wish-list in Parliament officially called the National Budget.

This time around, the minister tabled a K1.5 trillion financial plan that represents 22.8 percent of the country’s gross domestic product (GDP)—the value or measure of total goods and services produced and provided in an economy over a given period.

Currently undergoing the scrutiny of members of Parliament (MPs) through clusters where interest groups and stakeholders also lobby for improved allocations in their various sectors, the proposed 2018/19 National Budget is 13 percent higher than the revised K1.1 trillion  2017/18 budget expected to expire on June 30.

The minister believes the budget will stimulate growth and address concerns relating to the rising cost of living in the country. However, the budget is more consumption based and has fallen short of addressing critical issues, including investment in the energy sector where unreliable power supply has stalled production, thereby stunting economic growth.

Through national budgets, governments outline their expenditure plans and how they plan to raise revenue in a given financial year. It is in the budget where the government announces new taxes, reviews old taxes and changes taxation rates as the minister did on Friday.

Funding is key to realising proposed objectives in the budget. For a longtime, Malawi’s national fiscal plan has been financed from three sources of tax revenue, non-tax revenue (fees and levies) and external sources, mostly grants from development partners as well as loans.

But since revelations of Cashgate—the plunder of resources at Capital Hill exposed in September 2013—donors froze their aid taps on the recurrent budget where they contributed about 40 percent whereas in the development budget they opted to channel their resources through international non-governmental organisations. They have cited poor public finance management as the reason for their reluctance to entrust their respective public funds with the Malawi Government.

So, where will Treasury get the resources to finance the 2018/19 National Budget that seeks to achieve wishes of an administration seeking re-election?

In the absence of donor support, public tax collector the Malawi Revenue Authority (MRA) is yet again the main source of revenue given a target of K940 billion with non-tax revenue projected at K112.2 billion.

In the current financial year, MRA has struggled to meet its targets. This prompted a downward revision of the budget during the Mid-Year Budget Review. The poor performance of tax revenue was a mirror of the bad performance in industry where companies downsized, in some cases leading to retrenchments.

What I see in the minister’s assumptions is overdependence on the same old thin milk cow: the formal sector. Widening the tax base remains mere rhetoric with no action.

Improvements and new investments in energy are key to enhancing productivity. If the country aspires to transform from a predominantly importing and consuming economy to a producing and exporting nation, serious, meaningful and sustainable investment in energy should be prioritised. Malawi has all it takes to grow the economy. It is a matter of priorities and, of course, genuine political will.

Quick-fix solutions such as the diesel-powered generators recently procured do not reflect seriousness as a nation. Like someone remarked: “Ma generators ndi a ku chinkhoswe [gensets are a backup power source for social events and small-scale entreprenuers, not a country).”

It is not an exaggeration to say the budget is a mere wish-list. Like the current financial plan and others before it, it will likely be revised downwards at mid-term. Sadly, what will suffer, though, will be critical social services in health, education and agriculture.

But then, the minister summed it all. The budget is not money, it is a plan, a wish-list. He said: “My statement, therefore, will not be an all embracing plan of what is planned to be done and policies for the entirety of the economy. An annual budget is an account of what the government intends to do in a given year and does not pretend to cover all elements of what should be done in the country.”

 

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