‘Cut the chaff’: Malawi budget throws the poor under the bus

 “In Weekend Nation newspaper, award winning columnist  Ephraim Munthali of the  ‘Cut the chaff’  has taken a critical approach on President Joyce Banda’s state opening address of Parliament  which she announced the establishment of  a Mudzi Trust Fund . Here is the full article as it appeared:

Now that the contours of the K638.2 billion 2013/14 national budget that Finance Minister Ken Lipenga presented two weeks ago are visible, a discussion of broader strategic issues the fiscal plan wants to operationalise should be in order.

When the 2012/13 budget embraced—as anchors of government’s economic policy interventions—a floating exchange rate, monetary tightening that has pushed interest rates to more than 40 percent; balance of payment adjustment, austerity; the free market crusade that opened the flood gates for water and electricity tariffs to sweep the poor down the cliff as well as re-introduction of the automatic pricing mechanism to determine fuel prices, we knew that the once comatose neo-liberal agenda had resurrected, not in Washington, but right here in Malawi where it is alive and well.

In this agenda, super profits by banks and elite companies on the Malawi Stock Exchange, tax breaks for wealthy industries, enriching the already rich and impoverishing the already poor, is the success yard stick.

Malawi Finance Minister Ken Lipenga: Presented the budget
Malawi Finance Minister Ken Lipenga: Presented the budget

Gone are the days when poverty reduction was the centre piece of budgeting and policy making.

All this is clear when you look at the resource distribution according to the two policy documents currently determining the direction of the economy: the Malawi Growth and Development Strategy (MGDS), the Economic Recovery Plan (ERP).

The choice of budget goals is also an interesting revelation. The underlining assumption for the new budget is that Malawi’s economic growth as measured by gross domestic product (GDP) would expand by five percent in 2013 and 6.1 percent in 2014 from a tepid 1.8 percent in 2012.

Inflation is expected to moderate to 14.2 percent by December this year and seven percent by the end of next year whereas the Malawi kwacha is expected to stabilise as it settles into its so-called real market value.

What the budget does not say, however, is the rate at which poverty will drop and the jobs that will be created this year, among other key pocket book issues that directly affect the poor. Apparently, these don’t count as important budget goals.

Specifically looking at the allocations by the two key policy frameworks—the ERP and MGDS—the focus is on economic sectors, with no attempt at striking a healthy balance.

Take the ERP, for instance. Of the K8.9 billion earmarked to support the recovery efforts, 81 percent has gone to so-called economic sectors, with Agriculture getting K3 billion or 34 percent; Transport and Tourism sectors claiming K2.6 billion and K1.4 billion, representing 31 percent 16 percent respectively.

I submit that there can be no recovery with the exclusion of Health and Education sectors, which appear to be completely out of the recovery equation.

Otherwise, we will keep on having recovery budgets every year to recover from phantom recoveries exclusively seen from the eyes of an appreciating currency.

The ERP was an opportunity to reshape the country’s health and education system and government has just missed the chance to shape these two sectors so that they are able to anchor a more broad-based and balanced economic growth.

Analysed from the MGDS angle in terms of themes, the situation is no better. The 2013/14 budget allocates nearly 45 percent of its resources to economic themes against roughly 19 percent of social themes. The rest go to cross-cutting areas.

Given that a budget is the only instrument that provides direction to the economy, government appears to be leaving the poor behind to get poorer and pulls away with the wealthy as they get wealthier.

It is this same pro-rich approach that has seen the 2013/14 budget giving substantial tax breaks and other incentives to sectors such as tourism, construction, mining and exploration industries while leaving the middle class and other low income earners to shoulder the burden that the ‘gifts’ government is offering to companies in the name of attracting investment even when no study in Malawi has ever proved that such give-aways bring investors.

Moreover, the link between these incentives and poverty reduction is rather blurred.

But as you have heard, folks such as Press Corporation Limited group chief executive officer Matthews Chikaonda and pro-business lobby groups such as Economics Association of Malawi and the Malawi Confederation of Chambers of Commerce and Industry are ecstatic about this budget.

Sure, who wants less money? The poor I guess. But does this make them ideal collateral damage to be thrown under the government bus carrying tycoons?

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