Is the proposed budget meeting the expectations of Malawians?
By By Bernard Mphepo*
Malawians went to poll this year on June 23, 2020 for fresh presidential elections after the court nullified the 2019 presidential polls. The results of the fresh election was a clear manifestation that people wanted positive change for the better living standard. Politicians, being clever, promised what people wanted to hear. Opposition parties by then, for instance, capitalized on the fact that Democratic Progressive Party (DPP) led government failed to deliver on some campaign promises. They accused Democratic Progressive Party for failure to implement some of the agriculture policies, while knowing very well that the country’s economy depends very much on agriculture. One of the policies is Farm Input Subsidy Program which was targeting the poor families.
On the 11th of September, 2020 the Tonse Alliance Government, through the Finance Minister, Honorable Felix Mlusu, presented its first budget after winning the presidential elections. Malawians were expecting the budget that will help top deliver the campaign promises for improved living standard. Below is the analysis which assesses whether this budget will help to deliver the promises or not. Proposed recommendations are also explicated to ensure that no one is left behind as we strive to meet Sustainable Development Goals.
According to the Finance Minister, allocations in this Budget are in line with priorities outlined in the national development blueprint, the third Malawi Growth and Development Strategy. He also stated that the Budget has been formulated amidst Covid-19 pandemic which has negatively impacted on the country’s economic performance. The 2020/2021 budget is planned to focus on achievement of sustainable and inclusive growth; Macroeconomic stability; and sound financial management.
According to 2018 National Statistical Office (NSO) about 9 million Malawians are living below poverty line. Given this situation, if at all Malawi has to move forward, then this unacceptable prevailing social-economic state of affairs should be addressed. The poor people are facing numerous and serious social economic challenges due to post 2019 elections and global pandemic of Covid-19. There is, therefore, an urgent need to undertake initiatives aimed at social and economic transformation.
An increase in minimum wage is one of the initiatives that government must implement to bail Malawians out of poverty. The government through the Minister of Finance announced an increase on minimum wage to MK50,000 during presentation of the provisional budget. The proposal was referred to Tripartite Labour Advisory Council for agreement and being gazzeted into law. While the deliberations of the council has not been made public, Centre for Social Concern (CfSC) has noted with concern that even the proposed MK50,000 is not adequate to sustain decent living standard.
The low minimum wage is pushing more Malawians into poverty bracket. Malawians have been receiving poor wages for years. Studies conducted by CfSC through Basic Needs Basket findings revealed that the cost of living of recent is increasing due to global pandemic. In June 2020 the cost of living was over MK197,000 and is increasing every month. The food poverty line is over MK100,000. The proposed minimum wage cannot support to buy food that provides adequate energy and nutrition, let alone the buying of essential household needs. Provision of low minimum wage will not realise the Tonse Alliance government’s promise of ensuring that Malawians are eating three times a day, being able to access health services and improving access to education.
The low minimum wage is not necessarily due to the performance of our economy BUT total negligence of the reality on the ground. The CfSC believes that an increase in minimum wage will support majority Malawians to move out of poverty line. The poor Malawians are greatly affected by global pandemic of Covid-19. It is, therefore, imperative to formulate a budget that will also cushion the poor people in Malawi who forms majority of the population and not simply accommodating few rich people.
The CfSC believes that an increase in minimum wage will help majority of Malawians in attaining their rights such as Right to Food, right to education, right to access to quality health services, and right to life. The low minimum wage is impinging the supposed to be dignified life of Malawians in Malawi. There is a lot of discrimination due to provision of low minimum wage that was set by government. A lot of Malawians are wallowing in abject poverty due to provision of low minimum wage.
According to Finance Minister the 2019/2020 financial year closed with a deficit of K555.6 billion. Domestic borrowing increased from MK52.3 billion to K496.7 billion while net foreign borrowing reduced from MK109.7 billion to K58.9 billion. The Minister acknowledged that one of the major fiscal challenges for this country is the high and rising public debt stock. As at the end of June 2020, Malawi’s total public debt was recorded at MK4.1 trillion 57.3 percent being domestic debt. The same debt, domestic debt is currently rated at high risk of ‘debt distress’. The Minister also reported that Public debt interest payments have been projected at MK376.0 billion, representing 5.3 percent of GDP.
This is an increase of 244 billion from last year. An increase in public debt reduces disposable income for citizens since the government increased taxes. Increase in public debt also reduces provision of social services to its citizens. The minister failed to highlight clear strategies like reducing unnecessary executive travel, reduce some benefits for executives, and indeed, Members of Parliament should reduce unnecessary expenditures. The reduction of expenditure will lead to reduced borrowing. The continued appetite for borrowing by government will impact negatively poor Malawians.
Tonse Alliance Government has promised to complete the review of the Public Finance Management Act of 2003 during the 2020/2021 fiscal year in order to reduce public looting. The revised Act is expected to strengthen accounting, budgeting, revenue and expenditure management, internal controls and other areas of public finance management. The proposed changes in the revised PFM Bill include: Specific responsibilities of public officers with the inclusion of sanctions for violations against the PFM Act; Placement of personal accountability to Controlling Officers and public officers for actions taken in executing their roles and responsibilities; Placing the obligation of accountability of third parties that receive resources for the intended benefit of the people of Malawi.
It has been noted with regret that there is no time frame for the review of this important act. Speedy review of the act is therefore recommended to reduce public looting through theft. Malawians are waiting for government to walk the talk in this matter.
Moreover, the Tonse Alliance government promised Malawians universal subsidy. The proposed budget will only target 4.2 million farmers’ families. This is not the universal subsidy that citizens were promised during the campaign period.
Malawians are hoping that this program will not be another waste of resources that will only benefit the rich people belonging to the ruling and bourgeoisie classes. To reduce dependency syndrome the government must also have a priority of investing in promoting access to reliable and profitable agriculture markets to support vulnerable small holder farmers.
The Minister of Finance proposed MK10 billion for the purchase of maize by National Food Reserve Agency to replenish the Strategic Grain Reserves. This is a good gesture despite that this allocation only benefits traders and big companies other than small holder farmers. CFSC recommends that the government should buy the maize through ADMARC to ensure that smallholder farmers are benefiting from the allocated money.
The announcement of an increase in allocation to the Constituency Development Fund from MK30.0 million to MK40.0 million is not good news to taxpayers since the fund is highly abused by Members of Parliament, and it is taken as their pocket money. Increasing the fund without deliberate efforts to promote transparency and accountability will be a waste of resources for the country. The allocation of MK75.0 billion to MEDF might only be good news if MEDF is rebranded to ensure all Malawians are benefiting from the loans. This loan should not benefit political party zealots only as it has been the case before.
Conclusion
The 2020/2021 budget has failed to meet the high expectations of Malawians due to promises made by Tonse Alliance government. Malawians are yet to see whether this budget will achieve sustainable and inclusive growth, macroeconomic stability and sound financial management as outlined by The Minister of Finance. Members of Parliament are, therefore, asked to deliberate the budget with caution in order to ensure that citizens are getting what they were promised in its holistic sense.
*Mphepo is programme officer – Economic Governance – at the Centre for Social Concern
