A national budget that drew inspiration from political campaign rhetoric

On Friday, May 28, 2021, Finance Minister Felix Mlusu pronounced budget estimates for the 2021/2022 financial year and tongues have been wagging from all quarters of society on the pros and cons of his efforts.

Following a thorough consultative process by Ministry of Finance with all stakeholders across the board, the minister’s final output in Parliament shaped a narrative long yearned for by those who cast their vote for President Lazarus Chakwera and his Vice Saulos Chilima. With these budget estimates came a flicker of hope about short term fulfilment of most key campaign promises by the Tonse Alliance.

Minister of Finance Felix Mlusu presenting national budget in Parliament.-Photo by Govati Nyirenda, Mana

Deliberately, the budget has been postured to align with the country’s national development vision, Agenda 2063, which outlines that by the year 2063, Malawi should be “an inclusively wealthy and self-reliant industrialized upper-middle-income nation”.

“In many ways, therefore, sectoral allocations in this budget are in line with the long-term aspirations of our nation as enunciated in the Malawi 2063,” said the minister.

As is the case with all national budgets, all sectors will be impacted differently.

However, what came out clear was that other sectors have ground breaking interventions that will form the narrative for years to come. Prominent in the blueprint is the introduction of Duty-Free Week, which seeks to offer tax relief for Malawians to import goods valued up to US$3000 duty free.

When this aspect of the campaign package was omitted in last year’s budget and subsequent budget reviews, it opened a barrage of discontent remarks from Malawians who viewed it as just another hot air balloon by politicians.

The annual weekly event aims at boosting the growth of small businesses and to reinvigorate the economy suffering from the effects of Covid-19 pandemic.

Being a new tax facility, there are many questions around implementation modalities. However, what is key is the fact that the Tonse Alliance government seems determined to kick-start an annual event that will excite businesses and individuals alike.

Also standing out as fulfilment of a major campaign promise is the scrapping off of connection fees for water and electricity. According to Mlusu, the Ministry of Energy has already drafted Free Electricity Connection Policy, which will provide a platform for free connections to individuals and public institutions in the rural and peri-urban areas. A similar approach is being worked out for the implementation of free water connections.

Also new and phenomenal is the development of Special Economic Zones (SEZ) to spur serious industrialization across sectors. The K2 Billion allocation to this program will facilitate development of the zones at Matindi and Chigumula in Blantyre, Area 55 in Lilongwe, and Katoto in Mzuzu.

This is indicative that Malawi is now realizing how crucial the SEZ model is towards economic growth. Lessons abound of economies in the Sub Saharan Africa that are growing their economies through economic zones some of which are Ethiopia, Mozambique, Kenya and Gabon.

This year’s estimates still reflect continuity from last year’s budget with allocations towards projects and programs that were either started by the previous regime and those that commenced last year. For instance, the flagship Affordable Input Programme (AIP), which targets 3.5 million farming families, has received another huge allocation – K142 Billion.

It is a contentious allocation that draws out the ire of sceptics, donors inclusive, who keep questioning the rationale of spending such a huge amount on what looks like consumption. The Chakwera administration, however, insists on democratic socialist policies that are aimed at lifting the poor out of abject poverty through subsidies while using the agriculture sector as a driver of economic growth and job creation.

Within this economic philosophy and alignment to Pillar Number 1 of the Malawi 2063 is the belief that once you have sustainable food security, it is easy to upscale manufacturing and build a robust industry that will bring value to the economy.

It has been termed many things by observers and analysts. On one hand, there are those who see it as too ambitious while others say it is pro-poor with Robinhood bravery of redistribution of wealth among Malawians in different earning brackets. This is evident in the tax reforms around people’s monthly earnings, especially in the K100,000 – K1 million bracket whose PAYE tax has been revised downwards while those above K6 million have seen an upwards adjustment.

To a greater extent this year’s budget is about recovery from the devastation of Covid-19 pandemic. As a result, it was themed “Building Back Better: Achieving aspirations of the nation together”.

Whether or not Malawi starts recovering from implementation of this blueprint is a matter of time, commitment and probably sheer luck. Malawians can only wait and judge on what transpires in the next nine months.

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