Sona under the microscope – The Times Group

Sona under the microscope – The Times Group

Post was last updated: February 12, 2024

By Marvin Banda, economist:

BANDA-The Sona gives an impression of yet another year of highly consumptive budgeting

The State of the Nation Address (Sona) which President Lazarus Chakwera delivered on Friday was incredibly ambitious, to say the least.

The Sona may go down in history as the one that contains the most political promises in the history of Malawi.

The plethora of initiatives being announced may have aroused suspicion owing to the fact that, soon, the campaign period will start.

In a season when public debt has been a persistent problem, the President made a by-the-way statement and, yet, this is a crucial macroeconomic variable.

More so, it is likely that many of the promises will be paid off by contracting debt due to our narrow revenue base.

The President did not talk about fiscal discipline measures. He did not talk about the effect of the previous curtailment of some statutory expenditures such us the reduction of the 2,000 liters of fuel to 1,000 liters for the privileged class.

The truth is that certain potential harmful expenditures have been maintained and will likely be maintained in the upcoming financial year.

Remember that government saved less than K5 billion the last time it implemented the same.

Fiscal deficits and monetary policy

The 2023-24 fiscal deficits are predicted to reach K1,318.0 billion, out of which 90 percent was domestically borrowed (K1,186,563 million).

The Sona says: “At close of the fiscal year, it is expected that domestic revenue will have amounted to K1.628 trillion.”

To his credit, Chakwera acknowledged that this was not good enough.

Interest payments of public debt in the 2023-24 fiscal year is being proposed to be K914,864 million, which is calculated to be almost as much as government domestic revenues of the 2021-22 budget.

None of this was told to Malawians and, yet, we are expecting yet another deficit budget in 2024-25 as has been the terrible tradition of the Ministry of Finance.

Social Cash Transfer Programme

Social programmes that may have caused inflation may include the K9 billion which was issued in the 2023-24 fiscal year, out of which K7 billion was used for cash transfers.

This year, K15.75 billion per month (105,000 people receiving K150,000) has been earmarked for Zomba, Blantyre, Mzuzu and Lilongwe cities. K 4.79 billion per month (31,955 people) will be transferred to residents of Blantyre (yet again), Thyolo, Phalombe, Chiradzulu, Mulanje, Nsanje, Chikwawa and Balaka.

ATTENTIVE-Members of Parliament

This makes one wonder how inflationary the 2024-25 national budget may be. The Sona gives one an impression of yet another year of highly consumptive budgeting in the name of “cushioning citizens”.

Excuses will be made to plunder resources in favour of populist policies. Billions upon billions of Kwacha will be squandered and, yet, the economic situation for many may stay unchanged because they still do not have access to a conducive economic environment that may spur the creation of wealth.

Malawi 2063 vision and short-term implementation plans

In last year’s Sona, Chakwera celebrated thus: “We have commenced the implementation of 80 percent of the MIP [Malawi Implementation Plan-1]’s planned interventions, with a focus on tracking through the deployment of champions we have identified to drive implementation.”

The situation for Malawi is like this: The gross domestic product (GDP) growth rate was 0.8 percent in 2020, an assumed 2021 growth of 4.6 percent, 1.2 percent in 2022 and a projected 2.7 percent for 2023— against the consistent 10-year growth rate of 6 percent.

The President did not tell Malawians how devaluation has affected financing of projects that are meant to spearhead the MIP-1, as it was meant to cost K12.44 trillion (stipulated on page 109 of the MIP-1 under ‘annex’) as of 2020. This makes us wonder if the plan is actually being followed and, if so, why people have not been alerted to the new costs’ borne in this developing initiative.

Agriculture, Tourism, Mining (ATM) aspirations

Agriculture and Mega Farms: To the President’s credit, the government has started providing some clarity on the food security and export strategy for the Mega Farms initiative.

This initiative is important for the nation as Malawi is at a crossroads, which may lead to prosperity or damnation if, for example, there are delinquencies in loan repayment from entities such as National Economic Empowerment Fund (Neef).

This is where crop insurance would be helpful in order to safeguard public resources.

The potential from Malawi to be the food basket of the continent remains and, if capitalised upon, could lead to prosperity. The nation should be doing more on irrigation.

What is funny is that the country is exporting agricultural labour to Israel, which scarcely has fresh water bodies that can rival Lake Malawi, and, yet, we are the ones who do not irrigate intensely.

We need to see results from irrigation schemes that were being touted in previous budget statements.

A positive remark made in the Sona may be that regarding ethanol production, with Malawi said to have potential to produce over 96 million litres.

The production of organic fertiliser is another area full of potential, with some private sector players in the country said to have the potential to produce 200,000 bags of organic fertiliser.

Organic fertiliser is better for the environment. Most economists only talk about the price of imported chemical fertiliser against the balance of payment but not many, if any, will tell you that chemical fertiliser is detrimental to the health and productivity of our country’s soil.

Tourism: With the waiver on visas for citizens of other countries, the illusion is that international visitors will pour into Malawi.

However, this can also provide unforeseen consequences, including the crowding out of indigenous Malawians, who have ambitions to invest in the tourism industry as capital capacity may tilt in favour of foreigners.

Provisions should, therefore, be made to put Malawians first.

Mining: Continuing with the capitalization and operationalization of the National Mining Company, which is under the Ministry of Mining, and construction of a state-of-the-art mineral processing laboratory complex do not automatically translate to productivity of the mining enterprise.

Greater protection has to be provided to ensure that Malawians are participating in this sector. Notably, feasibility studies should be conducted by Malawian owned companies so that negotiation power remains with Malawians.

Climate change

The electric cars initiative is great news, but we have to fix our power generation problems as the President may have alluded to.

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