LILONGWE-(MaraviPost)-Minister of Economic Planning and Development Joseph Mwananvekha says Malawi’s economy is now stable and that government will leave no stone unturned to make sure that the benefits trickle down to the masses.
Speaking during pre-budget consultative summit in Lilongwe on Tuesday Mwanamvekha said despite the country’s economy facing some challenges of late everything else is in place to make it more robust.
He said.”Government remains optimistic that the exchange rate will remain stable in the medium to long term owing to the accumulation of Gross Official Reserves by the Reserve Bank of Malawi.
As at end June 2019, Gross Official Reserves were recorded at US$759.89 million, representing 3.64 months of import cover.
This added to holdings of foreign exchange by the market at US$340.2 million and this implies that the country’s foreign reserves are amounting to well above US$1 billion.”
According to Mwanamvekha this is unprecedented and it is for this reason that the Malawi Kwacha is expected to continue appreciating against other currencies.
The minister added that it is also pleasing to note that the economy
continues to register remarkable growth especially in terms of
agricultural production.
He observed that government projects a GDP growth rate of 5% in 2019 and a further 7% in 2020 emanating from the huge amount of planned infrastructure development in Government and continued focus on growth potential sectors.
“Now that macroeconomic stability has been achieved, Government’s focus, going forward, will be to attain inclusive, resilient and sustainable growth,” he said.
However the minister said despite this remarkable progress in the
economy, the Budget continues to experience fiscal pressure.
‘In the 2018/19 fiscal year, revenues did not perform as expected.
This was largely on account of unsatisfactory performance of the tax revenues and parastatal dividends.
Grants also under-performed on account of non-disbursement of projected Budget Support. This under-performance in revenue greatly affected the effective implementation of the Budget considering the existence of too many competing needs against a limited resource envelope,’ he added.
In his presentation Economics Association of Malawi President
Chikumbutso Kalilombe asked government to deal with the problem taxation as well as smuggling saying it is affecting local companies negatively.
Kalilombe also said there was need for government to work with
companies on issues to do with taxation saying it is important to tax profits only rather than the production costs as is the case now as this tendency chokes companies.
‘There is need to look at the issues of smuggling seriously and those
involved in this malpractice must face stiff punishment. Even traders selling smuggled goods must be punished as well. On taxation government must also make sure that companies are engaged so that a win win and long lasting solution situation is found,” he added.
Replying to Kalilombe the minister said that government will work
hard to seal the borders to deal with smuggling.
Vice Chancellor for the Lilongwe University of Natural Resources
Kanyama Phiri urged government to scrap off FISP saying the programme is still facing challenges and not benefiting all the farmers.
“We need to find a way out of Fisp so that we target specific problems for each district. If Chitipa has this problem ten we have to deal with that. If Lilongwe has this problem we must also find a solution for Lilongwe unlike the way the situation is now,” said Kanyama Phiri.
Executive Director of Malawi Economic Justice Network (MEJN) Grace Kunchulesi representing all the non-governmental organizations in the country, encouraged government to consider introducing automated ways of collecting market and vehicle parking fees and increase vote going towards nutrition among others.
She suggested; “We could love as Civil Society if the tax free bracket could have been increased to MK80,000 and that VAT on commodities such as water, bread and even energy be scrapped off to help Malawians.
Severance pay should also not be taxed because the workers must have already been paying taxes in one form or the other.”
The pre budget meetings will see Mwanamvekha and his team travelling to Mzuzu and Blantyre to collects ideas and suggestions from various stakeholders to be incorporated in the budget.
The Public Finance Management Act of 2003 mandates the Ministry of Finance, Economic Planning and Development to prepare and oversee the implementation of the National Budget.
The budget remains the most important national instrument through which public services and other economic activities in the country are implemented for the benefit of all Malawians.
Government has managed to attain macroeconomic stability.
Inflation remains low and in single digit at 9% for June 2019.
Forecasts indicate a continued decline in inflation to around 5% in
the medium to long term.
The decline in the inflation rate has given the RBM room to reduce its policy rate to as low as 13.5%.
This has resulted into reduced lending rates and the cost of capital
for the private sector. The Exchange rate has remained stable during the past three years at around MK750 per US dollar, although in the past month or so, there was some noticeable depreciation which was transitory mainly due to stocking by traders, importation of election materials and the slow start of the tobacco marketing season.
However the kwacha is now appreciating as pressure eases up because traders are no longer stocking, the elections are now behind us, and the tobacco marketing season has shown some signs of improvement resulting in steady flow of foreign currency. Targeted budget support has also started flowing in.
