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Newly coined budget concept to stifle economic growth, says Chikavu Nyirenda

LILONGWE (MaraPost)--Malawi government's newly coined concept, Zero-Aid Budget (ZAB) will have a major impact on tax revenues and the country's economic growth, economic analyst Chikavu Nyirenda has said.

Zero-Aid Budget, according to Nyirenda, is a creatively fangled expression that will see government drawing up a national budget to finance recurrent expenditure from domestically generated resources in form of tax and non-tax revenue.

"We are once again faced with a prospect of producing a budget on the assumption of no aid. We experienced with this new fangled concept under the Bingu wa Mutharika administration with the inappropriately names "Zero-Deficit Budget".

"And the results were, to say the least, disastrous. Whatever the case, the message is aloud and clear; no budgetary support to Malawi for the 2014/15 Fiscal Year and beyond if we keep handling finances in such a shoddy manner and fail to comprehensively address all the loopholes in the system that allow individuals to siphon billions of Malawi Kwachas from the public purse," said Nyirenda. 

The 2014/15 budget is conservatively estimated to be in the region of K700 billion.

"Based on the ZAB principle of financing recurrent expenditure and with reference to the 70/30 percent standard observed in the current fiscal year, this means that government needs to raise approximately K500 billion," he claims.

This, according to him, will put pressure on the already high interest rates that have effectively stifled economic activity.

"In addition, this will against a back-drop off decreasing levels of business activity due to the ever-increasing cost of living and inflation that have eroded disposable incomes-given that practically 95 percent of revenues are from taxes, this will have a major impact on tax revenue," he explains.

Government also owes the private sector huge arrears running into billions and failure to settle these obligations will lead to scaling down of operations and closure of some business, he warns.

But Finance Minister Maxwell Mkwezalamba argues that the country has the capacity to implement ZAB with locally generated resources.

He said it is high time Malawians realised that donors are phasinng out donor support to most African countries due to global economic challenges.

Tags: Chikavu Nyirenda  Malawi  

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