Minister of Finance, Economic Planning and Development Goodall Gondwe is conducting pre-budget consultations in preparation for the 2017-2018 national budget. The Nutcracker takes this rare opportunity to make contributions to the budget consultations. However, the developments of late last week cannot go without notice. The news that Akweni Honourable Patricia Kaliati was relieved of her duties as minister of Civic Education, Culture and Community Development was surprising. There are so many rumours as to the reasons for her dismissal and it is not in the interest of this column to render any value to those rumours. The fact remains that it is the prerogative of the President to hire and fire a minister with or without giving reasons. The Nutcracker only wishes Akweni well in her political career; it is not the end of the world.
Back to the issue of budget consultations, the mere fact that Gondwe asks for advice on the budget has no bearing at all on whether he intends to listen to it. In the last 10 years, Malawians go through this ritual of public consultations. Some have argued that these consultations are little more than cosmetic public relations to create an illusion that the government is listening to people’s concerns as they prepare the budget but the fact is these consultations are a waste of time regardless of whether the government is sincere or not. Despite those negative sentiments, it is the belief of The Nutcracker that the consultations provide an opportunity for industry and multiple associations, economists, academics and interest groups to share their thoughts on the national budget for the coming year.
The minister is in much better position this year than last year. During this time, last year, Malawi as a country was grappling with a food shortage of significant proportions, inflation was above 22.1 percent in March 2016 and the Malawi kwacha was oscillating like a yoyo in the hands of an excited birthday boy. At the end of the year, the economy could only increase by 2.7 percent, a figure well below the rate required for the country to reduce the levels of poverty and misery in Malawi. In fact, this was well below the 5.1 percent that Gondwe presented in Parliament. This is despite some of us clearly indicating that the rate of 5.1 percent that the minister was preaching was simply impossible. The Policy Rate (PR) remained high and virtually unchanged at 27 percent, as a result the average base lending rate also remained unchanged at 36.3 percent as at end of March 2016.
The economic situation might not have improved that much; however, there are positive indicators that should give the minister no excuses in the upcoming budget. Inflation has reduced to around 16 percent and PR is now 22 percent. These factors should be used to jump-start the economic resurgence of Malawi. There is no time to play semantics with the budget.
The Malawi economy is very linked to agricultural production. The minister should prioritise the agricultural sector in the next budget. The Greenbelt Authority should be given the financial resources to deliver on its objectives. There is also need to significantly reduce the Farm Input Subsidy Programme (Fisp). Fisp was a good idea that has outlived its purpose. From the noble initiative of Bingu wa Mutharika which won Malawi accolades in Africa and beyond, this initiative has been highjacked by greedy politicians, businesspeople and civil servants. It has now become a magnet for corrupt activities and hence its value and use has been completely decimated. If The Nutcracker was the minister responsible for the budget, he would simply abolish this programme this year. Those families that would require food support would be assisted by a different programme that should be very well targeted and designed based on the specific needs of the families involved.
Instead, in the interest of diversification, the budget should create incentives for commercial farmers to venture into food production as well. The recent maize scandal has given all indications that there is enough potential for commercial farmers in Malawi to feed this country if the conditions and incentives were right.
The other important area that the budget should focus on is infrastructure development to create a network that will connect the manufacturer to the sources of raw materials. The lack of infrastructure is a major contribution to the lack of diversification in the country. There is evidence that good roads and communication infrastructure reduce costs of production and propel’s economic development and diversification.
It is common sense to assume that the budget will also prioritise the generation of electricity and other utilities like water. The power situation in the last three years has set the economy on a downward trend. Substantial public investment is needed in the generation of power and other utilities for both household and industrial purposes. Finally, the budget should ensure that there are adequate funds for oversight institutions such as the Anti-Corruption Bureau and the National Audit Office; otherwise, the budget funds will simply be used to benefit the personal economic emancipation.
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