By Kingsley Jassi:
The K8.05 trillion proposed national budget leans heavily towards consumption, which will continue to put a strain on the economy, the private sector umbrella body, the Malawi Confederation of Chambers of Commerce and Industry has said.
Almost half of domestic revenue goes towards debt repayment, as public debt soars to K16.1 trillion. And there is a K2.47 trillion deficit that will take in more borrowing.
In her response to the budget statement presented to Parliament by Finance Minister Simplex Chithyola Banda on Friday, MCCCI Chief
Executive Officer Daisy Kambalame said there are contradictory policies in the budget, which appears to encourage imports like second hand clothes.
“There is an allocation of K60 billion for food purchase but we also see just K14 billion for industry which is a disconnect because you need to allocate more resources in production if you are to increase consumption,” said.
The Finance Minister eyes K2.33 trillion to borrow from the domestic financial market, representing 9 percent of GDP while K145.78 billion will be borrowed from the foreign market.
In a separate interview, Institute of Chartered Accountants of Malawi Chief Executive Officer Noel Zigowa said the presented budget framework does not promise increased productivity at the time productivity is at the lowest in recent years.
“There is a lot of talk about industrialisation, making companies increase productivity and create jobs, but the sector of industry has only been allocated K14 billion. This is quite a challenge to achieve industrialisation,” said Zigowa.
Nevertheless, the fiscal policy statement has highlights of attempts of reducing the suffering of some sections of the society while providing a few incentives to the production sector, removing VAT on bread and confectioneries.
The Minister announced concessions in irrigation, tourism, agriculture, manufacturing and according to the MCCCI Chief Executive, this will help to stimulate production to some extent.
Other winners are those the foreign incorporated companies whose income tax has been reduced from 35 percent to the regular 30 percent, a move that aims at attracting more foreign direct investments.
In his address, Chithyola Banda said the government is also introducing mega farms as a priority sector, while undertaking a comprehensive review of the Priority Industry Scheme Regulations.
“This reform aims to enhance transparency, streamline eligibility criteria, and ensure broader access to these incentives,” Chithyola said.
The initiative is said to align with the ATM&M strategy, particularly in the agriculture sector, and is designed to encourage greater participation in priority industries while driving sustainable economic development.
There is also removal of excise on importation of new electric vehicles while fairly used ones will attract a reduced tax rate of 35 percent from 75 percent.
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