By Sylvester Kumwenda and Lilly Kampani-Mana
Minister of Finance Felix Mlusu on Friday presented the 2020/ 2021 National budget estimated at K2.2 trillion, of which K1.179 trillion is of domestic revenue while K255.7 billion as total grants.
He presented his first substantial budget that has been developed under the theme “Living The Promise” during the 49th meeting of first session of parliament.
This projected total expenditure for the coming fiscal year is about 30.6 percent of the country’s Growth domestic Product (GDP) and representing an increase of around 22.9 percent from the 2019/2020 preliminary expenditure outturn.
He said the K2.190 trillion budget focuses on achievement of sustainable and inclusive growth, macroeconomic stability and sound financial management.
“These objectives will be pursued through transparency and accountability, rule of law, enhanced resource mobilization, efficient resource utilization and provision of relevant infrastructure.
“These are some of the promises the Tonse Alliance made to the people of Malawi,” the Minister said.
Allocations to sectors
The Education sector has claimed the lion’s share with K384 billion allocated to it, representing a 21.6 of the total budget.
The Agriculture sector has been allocated K354.8 billion for wages and salaries, maize purchases and Affordable Input Program (AIP) and other developmental projects.
The Health Sector has been allocated K204.7 billion for procurement of drugs and vaccines, operational expenses for central and district hospitals amongst others.
The Transport and Information Communication Technology (ICT) sector has been allocated K150.6 billion, the Energy sector got K57.8 billion, Governance and rule of law has been allocated K52.8 billion with substantial increases for graft busting bodies.
The development budget has been pegged at K511.2 billion for development.
Mlusu said implementation of the budget would be challenging due to the adverse effects experienced due to COVID-19 which has for example seen a decline in revenues.
He said government would work closely with revenue collecting bodies and the developmental partners to mitigate pressures on the budget.
Mlusu has given a projection of 4.5 percent in economy for the year 2021.
However, one of the areas that many people have been expecting to hear from government is on the AIP.
“In the 2020/2021 financial year, Government will implement the AIP where all the 4.2 million farm families will be provided with cheap farm inputs. This is not far from being a universal subsidy program assuming an average family size of four people, which gives approximately 16.8 million people that will be covered under this programme out of the 17.6 million people in the country.
“In this regard, there is no sampling of farm families to benefit from this programme as every smallholder farmer is covered,” he said.
On Free electricity and water connections, the Minister said government has embarked on reforms of the concerned utility companies and said upon completion; government shall be able to implement its promises.
On reduced passport fee and free driving licence renewal, Mlusu said government has engaged the concerned suppliers as the services are currently being rendered to government on contractual arrangements.
He said the creation of 1 million jobs remains at the heart of the Tonse government.
“The Tonse alliance Government is committed to creating a million jobs within one year of office and that job creation will continue to be the main focus going forward.
“In this regard, Government has developed a road map with key activities that will be undertaken to facilitate the translation of this agenda into action,” he added.
The budget has seen an increase in the allocation of the Constituency Development Fund K30 million to K40 million.
He asked members of parliament to exercise prudence financial management with the funds.
The Pay As You Earn tax band has been increased form K45 000 to K100 000.
But government has introduced a standard rate of 16.5 percent VAT on refined cooking oil, increased the withholding tax threshold for casual labour from K15, 000.00 to K35, 000.00 per transaction.
The introduction of a 20 percent withholding tax on winnings from betting and gambling transactions including lotteries, all these to be effective October 1, 2020.
The Minister announced the cancellation of the Third Extended Credit Facility on account of changes in policy by the new Administration and said government would negotiate a new credit facility.
“However, in the interim, Government has negotiated a second Rapid Credit Facility which is a fast disbursing instrument amounting to US$100.0 million during the 2020/2021 fiscal year,” he said.
Some of the highlights in the budget include a K523.7 billion for wages and salaries, Interest payments projection of K376 billion, pensions and gratuities projected at K102 billion, K160.2 billion allocation to the Affordable Input Programme in the 2020/2021 financial year and maize purchases of K10 billion.
A K400 million allocation to Ministry of Gender, Community Development and Social Welfare for the implementation of the Action Plan for the protection of people with albinism, and a further K100.0 million to the Disability Fund.
Some of the major developments earmarked in the budget include the construction of Teachers Training Colleges in Rumphi, Mchinji and Chikwawa, Agriculture Commercialization Project, Agriculture Infrastructure and Youth in Agribusiness Project, construction of the new Phalombe District Hospital, construction of the Cancer Centre and Mponela Community Hospital.
Government intends to cconstruct the Lilongwe-Kasungu-Mzimba turnoff- Kacheche-Chiweta M1 road, Thyolo-Thekerani-Muona-Bangula road and implementation of the Salima-Lilongwe Water Project amongst others.
He said government has put in policy measures to support implementation of the budget, including the rebranding of the Malawi Enterprise Development Fund (MEDF).
“Government has instituted a financial audit and is in the process of reviewing operational models and procedures of MEDF. This process will lead to a total rebranding, including change of name of this very important institution,” Mlusu said.
The Minister said the Tonse Alliance would complete the review of the Public finance Act of 2003 during the 2021/2021 financial which is expected to strengthen accounting, budgeting, revenue and expenditure management, internal controls of public finance management.
He as such urged parliamentarians to deliberate on the budget with sober minds.
“This is a budget for all Malawians. I therefore wish to urge the August House to support the Budget by constructively debating and contributing to the proposals that I and my team in the Ministry of Finance and with inputs from other relevant stakeholders have put together,” Mlusu stated.
Members are expected to deliberate on the budget for at least 10 days.
The budget has been developed under assumptions of a Real GDP growth rate of 1.9 percent in 2020 and 4.5percent in 2021, an average inflation rate of 9.9 percent and a policy rate of 13.5 percent during the fiscal year;