Economy Malawi unveils $2.1bn budget for upcoming fiscal year

Malawi unveils $2.1bn budget for upcoming fiscal year

 

Finace Minister Goodall Gondwe
Finace Minister Goodall Gondwe

(AA) – Malawi’s Finance Minister said Friday that his country will have to foot the budget for the upcoming fiscal year since donors have contributed nothing to his 902 billion kwacha (about $2.1 billion) 2015/16 financial plan.

“The major highlight in this budget is that there is no budgetary support,” Finance Minister Goodall Gondwe told the Malawian parliament on Friday.

Until the 2014/15 budget, before they decided to withdraw aid, donors used to contribute a minimum of 40 percent of the annual development budget, Gondwe said.

“But our economy is projected to grow by 7 percent,” he added.

Gondwe, who had earlier told Anadolu Agency that the budget will be hard to sell to lawmakers, told parliament Friday that he hoped the drop in inflation – which was triggered by declining oil prices and a narrowing budget deficit – will lift the value of the kwacha.

“The budget is drawn on the assumption that headline inflation will fall to 16.4 percent and that interest rates will also go down in the budget year,” the minister said before parliament.

Malawi’s inflation has dropped from 24.2 percent in November 2014 to 18.3 percent in April 2015, largely due to the strengthening of the kwacha, which is supported by a drop in global oil prices.

“The government will continue to implement a flexible exchange rate regime with the Reserve Bank of Malawi,” Gondwe said, adding that the government will only intervene in the foreign exchange market when it becomes “necessary to ensure orderly market conditions”.

Addressing the national assembly, Gondwe went on to note that projected revenues have been dropping, proposing that the government introduces new tax measures – including a 10 percent tax on internet services – to raise funds.

Conversely, the government slashed taxes on brand new vehicles, a move seen by many as an incentive to motor vehicle franchise companies, whose revenues have been dropping due to an influx of second-hand imported cars.

The finance minister added that the top priority of 2015/16 financial plan is to acquire enough foodstuffs to ensure that Malawians have enough food in the wake of the projected  27.7 percent drop in the country’s maize production.

“The government will spend 8 billion kwacha [about $17 million] for maize purchases during this year, and 13 billion kwacha [roughly $28 million] will be spent during the 2015/16 on maize which will benefit all Malawians,” Gondwe added.

New notable expenditures in the 2015/16 financial plan include financing the Higher Education Students Loan and establishing a grant fund for university students.

Gondwe said that the country’s overall budget deficit is projected at 4 percent of the country’s gross domestic product (GDP), a slight drop from last year’s budget deficit, which stood at 4.2 percent of the GDP.

At the same time, Gondwe noted that domestic borrowing is projected to reach 0.7 percent of the GDP, while domestic debt stock is expected to drop from 15.9 percent to 14.5 percent of the GDP.

“I expect tax revenues to go up as the Malawi Revenue Authority has strengthened the tax administration regime,” Gondwe told the assembly, adding that the government will continue to subsidize agricultural farm inputs despite “aid taps being dry”.

The government will also implement new programs, such as a new pension schemes for civil servants and a youth employment and empowerment initiative, the latter of which would be aimed at creating employment for the country’s youth and boost their capacity, the minister noted.

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