By Taonga Sabola, LILONGWE Malawi
Malawi Finance Minister, Simplex Chithyola Banda, Monday presented a revised 2023-24 national budget which has seen the financial plan rising by about K540 billion ($ 320 Million) from the initial K3.79 trillion presented in February to K4.33 trillion ($2.57 Billion).
Malawi has struggled to sustain growth for decades, despite large inflows of official development assistance. The past three years have been particularly difficult, with stagnating growth and widening macroeconomic imbalances due to unsustainable debt and the lingering effects of multiple shocks.
Malawi’s external debt is unsustainable and debt service needs are eroding limited fiscal space.
Presenting the statement to
Parliament Monday, Chithyola Banda attributed the jump in the overall
expenditure to compensation of government employees, social benefits, public
debt interest, other expenses and the use of goods and services.
Of course, Chithyola Banda has
largely benefitted from the resumption of budget support which will see an
immediate injection of $240 million (about K408 billion) from the World Bank,
African Development Bank and the European Union (EU), among others, as they
have come back after theInternational Monetary Fund (IMF) granted Malawi an Extended Credit Facility(ECF) Programme last week.
In the budget, Chithyola Banda
has made an K80.05 billion provision for civil servants’ pay hike to cushion
government workers from the effects of the recent devaluation of the Kwacha.
This will culminate in the
rising of the wage bill from K900.44 billion to K980.49 billion.
In the revised budget, the
finance minister has carefully attempted to avoid overburdening the private
sector and resource-constrained Malawians with more taxes by announcing
innovative ways of generating revenue without hurting the industry.
Among other things, Chithyola
Banda has brought about some new thinking in revenue and forex mobilisation by
coming up with initiatives such as the Golden Visa Programme, cannabis
(marijuana) biomas trading, diaspora cities, carbon credits trading, labour
exports, discounting mineral deposits and others.
For example, Chithyola Banda said Malawi is expected to export over 5,000 labourers, through a government-to-government arrangement with an unnamed government— which will see Malawi earning about $180 million (about K306 billion) annually.
On the Golden Visa Programme,
Chithyola Banda said the government intends to roll out a
residency-by-investment programme that allows high net-worth individuals and
their families to obtain residency or even citizenship in a foreign country by
investing in its economy.
He said upon expressing
interest and qualifying for the programme, such individuals are usually
required to pay a fee of around $200,000 for the golden visa.
According to Chithyola Banda,
main areas of investment identified for this programme include mega farms in
agriculture.
He cited hotels as another
area that would be earmarked in the tourism sector.
“The ministries of Finance and
Economic Affairs, Tourism and Agriculture will embark on a campaign to market
Malawi as an investment destination under a Golden Visa Programme and, in the
next five years, the target is to issue out 10,000 visas to investors which, in
turn, can fetch about $2.0 billion.
“When all these initiatives
are implemented— and we are determined to do that— this country can, in the
next two years, generate approximately $3.5 billion depending on the maturity
profile of the different projects,” Chithyola Banda said.
On Cannabis biomas, also known
as Malawi Gold or chamba, Chithyola Banda said the country has potential to
earn $700 million from the crop annually.
“This is another area the
government has focused on as a diversification area. Malawi is one of the
largest producers of Cannabis in Southern Africa and, at prevailing market
prices, this country has potential to generate over $700 million a year from cannabis
biomass.
“Government is reviewing the
Cannabis Regulation Act of 2020 to allow participation of the local cannabis on
the international market. On the production side, joint venture negotiations
between government institutions and private sector investors are at advanced
stages,” Chithyola Banda said.
According to Chithyola Banda,
revenues and grants have been revised upwards from K2.55 trillion to K3.05
trillion.
He said the proposed revisions
in revenues and expenditures will result into a widening of the estimated
fiscal deficit from K1.24 trillion, which is 8.0 percent of GDP, to K1.28
billion, representing 8.3 percent of GDP.
The widening deficit,
according to Chithyola Banda, is mainly on account of absorbing the impact of
exchange rate correction.
To cushion Malawians from the
effects of the 44 percent devaluation of the Kwacha, Chithyola Banda said
government will continue implementing Cyclone Recovery interventions in
Blantyre Rural, Thyolo, Phalombe, Chiradzulu, Mulanje, Nsanje, Chikwawa, Balaka,
Mangochi, Machinga and Zomba Rural targeting 184,920 households where
beneficiary households receive K150,000 as support for consumption needs.
He said government would
re-introduce the Price Shock Urban Emergency Cash Transfer Programme which will
target 105,000 households in Zomba, Blantyre, Mzuzu and Lilongwe city councils.
Beneficiaries will receive a once-off transfer of K150,000 covering three
months.
“Government has increased
Social Cash Transfer Benefit Levels by 57 percent, which is more than the
exchange rate alignment amount and this is with immediate effect.
“Government has increased
Social Cash Transfer beneficiary coverage from the current 10 percent to 15
percent of the population. Government has also increased the wage rate for the
Climate Smart Public Works Programme (CSPWP) and [this] will be announced in
due course. Currently, beneficiaries receive K1,200 for four hours working day
for 12 days a month. Furthermore, CSPWP Beneficiary Work Period will be
extended by having no breaks between cycles for six months in a year,” he said.
National Planning Commission
Director General Thomas Munthali has since hailed authorities for putting up
measures aimed at boosting the productive sector as well as the country’s
foreign exchange reserves.
According to Munthali, what
the authorities need to do “is to adequately fund agencies that are responsible
for overseeing the deliverables” so that they have no excuses whatsoever.
He said with strict
supervision, the measures should enable Malawi to generate the required forex.
Scotland-based economist Velli
Nyirongo yesterday said, overall, the minister of finance has performed well
considering the inherited economic challenges.
He said the government’s
decision to export labour has the potential to significantly boost Malawi’s
economy, generating up to $180 million annually.
He, however, said concerns
arise due to the undisclosed destination, emphasising the need for transparency
to ensure worker protection and fair working conditions.
Economics Association of
Malawi President Betchani Tchereni said the changing macroeconomic environment
violated the assumptions of the budget.
According to Tchereni,
exchange rates, interest rates and the inflation rate have all risen
beyond the assumed levels.
“As such, government, also as
an economic agent, is facing the same macroeconomic environment. This is why
the budget has increased,” he said.
Leader of the Opposition in
Parliament Kondwani Nankhumwa is one of the people that shook Chithyola Banda’s
hands after he presented the budget statement.
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