LILONGWE (Maravi Post)—Malawi Finance Minister Goodall Gondwe on Friday unveiled a MK1.2 trillion national budget up from K917 billion which has seen social analysts describing it as a punitive package due to the introduction of taxes-Value Added Tax (VAT) on essential commodities for the rural people whose income still remain less than a dollar a day.

 The financial year plan has introduced VAT on sugar, salt, soap, bread whose prices will likely go up—making the already stricken local communities keep on struggling with life.

 

Gondwe told the nation that total expenditure and net lending represents 26.1 percent of nominal GDP, an increase of 23.9 percent over the 2015-2016 revised expenditure of K902.3 billion.

 

In the budget, the Ministry of agriculture has gotten the lion’s share pegged at MK198.5 billion seconded by Ministry of Education with MK147.6 billion for Ministry of Education and thirdly Health Ministry at MK9.8 billion.

 

Of the projected K1.136 trillion, recurrent expenditure will be MK815.5 billion or 18.7 percent of GDP, which is higher than the 2015/16 allocation by 16.8 percent.

According to Gondwe, the Development expenditure will increase by 57.0 percent from MK217.5 billion to MK317.4 billion, or 7.3 percent of GDP.

 

“Up to K279.8 billion or 82.2 percent of the development budget will be provided by development partners through loans and grants, while local resources will account for the balance of K37.6 billion or 11.8 percent. Therefore, the donor contribution to the development programme is anticipated to increase by 62.0 percent relative to 2015/16”, said Gondwe.

 

The total revenue and grants during the 2016/17 fiscal year are estimated at MK965.2 billion or 22.2 percent of nominal GDP. Of this amount, some MK708.8 billion will be tax revenue, MK66 billion will be non-tax revenue, while MK190.4 billion will be grants from Malawi’s cooperating partners.

 

“Thus, MK774.8 billion or 80.3 percent of these resources will be domestically generated, while the remaining 19.7 percent will represent donor grants. Compared with the 2015/16 revised budget, tax revenues are projected to increase by 21.8 percent, reflecting the fact that nominal GDP, which is the base for most of the taxes, will grow by 24.0 percent.

 

“Tax on income and profits will account for 55.4 percent of total tax revenue, while tax on goods and services will generate 37.2 percent,” said the Minister.

But he noted that non-tax revenue is shown to be lower relative to the 2015/16 revised budget estimate of MK71.9 billion.

 

Gondwe disclosed three key factors and priorities which will be taken into consideration when preparing the 2016-2017 budget including putting reflection of agreement between Government and IMF within the context of seventh and eighth reviews of Extended Credit Facility arrangement; assumptions that macroeconomic outlook for the next financial year, where the real GDP growth is projected at 5.1 percent while nominal GDP will grow by 24.0 percent and that the average inflation rate in 2016/17 is projected reach 17.4.

 

On maintaining IMF programme and addressing socio-economic problems, Gondwe indicated that the budget seeks to increase domestic resource mobilization; make available adequate resources for maize procurement, and to support irrigation farming; to ensure that the wage bill is maintained below 7 percent of nominal GDP; and to ensure that resource allocations to the health, education and other critical social sectors remain adequate and a significant proportion of the budget.

 

However, the good news is that Gondwe assured the nation that the World Bank and European Union will resume budgetary support within the year. He however asked the revenue collector, the Malawi Revenue Authority to pull up its socks and collect more money for the government to provide its services effectively and efficiently in the absence of donors.

 

Gondwe also announced strict measures to prevent the plunder of public resources which include the introduction of inspectors in ministries which draw huge sums of money from the national budget.

 

He also said employment of civil servants will continue to be pending except “some 10500 primary school teachers, over 400 secondary school teachers, health workers and people in security agents of police and military” and also said that government will increase civil servants salaries by an average of 15 per cent despite the economic problems facing the country.