Africa-Press – Malawi. Minister of Finance Simplex Chithyola Banda, barely five months in that capacity, Friday presented his maiden budget, eyeing recovery and resilience in the economy.
However, one of the dark clouds hanging on the vision of the K5.98 trillion budget is that it has a deficit of K1.43 trillion as government expects to mobilise K4.55 trillion. The K1.43 trillion fiscal deficit represents 7.6 percent of Malawi’s Gross Domestic Product (GDP).
According to Chithyola Banda, government will finance this budget through domestic borrowing amounting to K1.28 trillion, representing 6 percent of GDP and K150 billion foreign borrowing.
However, greater variance in the numbers could be expected because of the effects the climate pattern may have on the potential harvest for this agricultural season which may also put a strain on the national bill.
Larger picture
Chithyola Banda highlighted that the development expenditure for the 2024- 2025 Financial Year is estimated at K1.77 trillion, of which K1.39 trillion is for foreign financed projects and K383.6 billion is for domestic financed projects.
He said the proportion of development expenditure to the total budget now stands at 30 percent from the 24 percent in the 2023-24 Financial Year. Of the total expenditure, recurrent expenses are estimated at K4.21 trillion, representing 22.5 percent of GDP and 70.4 percent of total expenditure. This continues the staggering trend of government expenditure that needs to be checked.
Sector allocation
The health sector has emerged the biggest winner receiving K729.47 billion, representing 12.2 percent of the total budget. Chithyola Banda said the money will, among others, be used for implementation of the projects such as completion of the National Cancer Centre, construction of Dowa and Rumphi district hospitals, feasibility study for the construction of Chikwawa Hospital and the Malawi Emergency project to protect essential health services.
The agriculture sector has received K497.75 billion, representing 8.3 percent of the total budget. Worth noting in this sector is maintenance of the Affordable Input Programme (AIP) which has received K161.28 billion. This is an increase in the figure from K117.7 billion which was allocated for the programme in the 2023 -24 budget.
Further, government has allocated K12 billion for maize purchases by the National Food Reserve Agency to replenish the Strategic Grain Reserves whereas Admarc has been allocated K40 billion for operations and revamping of agricultural production and value addition.
The transport and ICT sector has also received K439.64 billion representing 7.4 percent of the national budget. This is where government has earmarked some 12 roads for construction and completion in the year.
Tax amendments
Chithyola Banda announced several tax measures, beginning with removal of import duty and import excise tax on electric motorcycles. However, he indicated that the standard rate of Value Added Tax (VAT) will be applicable on both the electric motor vehicles and the electric motorcycles in line with good practice in VAT administration.
Furthermore, Chithyola Banda also announced waivers on import duty and import excise tax on building materials, furniture and fittings specifically for the construction of hostels for students in tertiary institutions.
There is also an increase in import duty on finished iron sheets from 15 percent to 25 percent, increase in import duty for sacks from 20 percent to 25 percent and introduction of a surcharge of 10 percent on sacks for cement packaging.
The tax measures illuminate government’s intent to, in a way, penalize importation of finished goods while promoting importation of raw materials to spur local production.
Pay As You Earn
Chithyola Banda announced the increase in tax-free band from K100,000 to K150,000, with the rest of the tax structure as follows: next K350,000 will be taxed at 25 percent; next K2,050,000 will be taxed at 30 percent and excess of excess of K2,550,000 will be taxed at 35 percent.
Local councils
There was jubilation among the Members of Parliament when Chithyola Banda announced the doubling of the Constituency Development Fund from K100 million to K200 million.
Under the local assemblies is also K20.1 billion for the construction of city roads, K12 million per constituency for the construction of water structures and K14 billion for the rehabilitation of district hospitals. Chithyola Banda said the budget reflects the views of the people of Malawi regarding their aspirations and how those aspirations will be achieved.
Battered economy
He admitted that the economy has been sailing through both internal and external shocks that have resulted in slow growth, high inflation, and unsustainable debt levels.
“These have exacerbated fiscal pressures from low revenue and high expenditure demands,” he said.
Chithyola Banda said to tackle the fiscal imbalance, government will enhance domestic revenue mobilization and ensure expenditures that target productive sectors.
The theme of the statement was ‘From economic recovery to resilience through accelerating production and enhancing the legal and regulatory environment to protect the economy.’
For More News And Analysis About Malawi Follow Africa-Press
