Experts brand Mlusunomics as ‘unrealistic’ on inflation reduction

Finance Minister Felix Mlusu’s 2021/2022 fiscal budget—delivered at the Parliament Building in the capital Lilongwe on Friday, May 28, 2021—has already began proving what critics said that the K1.9 trillion budget “is unrealistic” following a contradiction between the ministry and the treasury on inflation.

Members of the national assembly are presently locked in cluster meetings as per parliamentary requirement, and are expected to return to the chamber in two weeks to debate it before they can decide to pass or reject it.

Minister of Finance Felix Mlusu presents the provisional Budget in the Chamber-pic by Lisa Kadango

‘Unrealistic’

Already, Mlusu’s budget—his second since he was appointed minister responsible for finance last year—faced huge criticism from main opposition, the Democratic Progressive Party (DPP), describing it as “a pro-rich budget.”

For instance, the Party’s spokesperson on financial matters, Joseph Mwanamveka, himself a former finance minister and before that a secretary to the treasury, said “there is nothing in the budget that hints on how it will come into fruition.”

He had told Nyasa Times in an interview immediately after Mlusu had read out his 55-page budget document that, among others, most statistics laid out in the budget were “unrealistic” and questioned how government would collect enough revenue to fund the budget as there had been some unrealistic tax exemptions.

In the budget, Mlusu announced a duty-free week of imported goods of up to US$3 000 and the scraping off of electricity connection fees, among others.

“It is an idealist document, if you asked me,” said Mwanamveka, “there is nothing realistic there [in the budget.”

Mwanamveka had also said that the current Tonse administration would not be able to lower inflation as “it keeps promising,” saying there were no clear policies to effectively manage them as they [DPP] had done.

Malawi had the lowest inflation of 6.3 in 2010 during President Bingu wa Mutharika’s time. Bingu, brother to immediate past president Peter Mutharika, founded the DPP.

‘Hide and Seek on Inflation’

Strangely, it seems, the Treasury and the finance ministry have started playing hide and seek on numbers regarding inflation.

Treasury has “shifted the goal post on headline inflation target,” setting a 5.0 percent goal by 2022 from 2021 as earlier projected by the Reserve Bank of Malawi (RBM), so reports The Daily Times.

On the other hand, the finance ministry “has set yet another ambitious 3.0 percent target for headline inflation by 2025.”

Mlusu had said during his budget presentation that in 2019 and 2020, the average annual inflation rate remained within single digits, recorded at 9.4 percent and 8.6 percent, respectively; and he projected an average inflation of 7.4 percent during the nine-month financial year.

“Inflationary pressure during the fiscal year is expected to be moderated by subdued food inflation especially on account of increased maize supply,” Mlusu had said.

Headline inflation is greatly affected by maize availability as the stable commodity constitutes 45 percent of the Consumer Price Index, and the country has had a good harvest this year courtesy of the Affordable Input Programme (AIP).

But uncertainties continue to hover around exchange rate stability and fuel prices.

‘Unrealistic Projection’

Economics experts, Chancellor College-based Laston Manja and Malawi University of Business and Applied Sciences (MUBAS) lecturer Betchani Tchereni, have rated Mlusunomics’ short to medium term headline projection as unrealistic.

Said Manja: “We were expecting things to be better now such as shocks from exchange rate but things are still bad even though we are in the harvest season which means it might not change when we go back to the farming season.”

And, Tchereni said it was difficult to realize the projected inflation as “the country is always susceptible to exogenous socks,” suggesting that Malawi needs to diversify the economic base first “if it were to work towards containing the pressure.”

Earlier in March, headline inflation eased for the first time in five months to 9.2 percent courtesy of a reduction in maize prices.

Last year, Nyasa Times has learnt, RBM adopted a symmetric band of 2.0 percentage points around the point target.

This means, when setting an inflation target, the central bank will aim at maintaining the rate within a range of plus or minus 2.

Follow and Subscribe Nyasa TV :

Sharing is caring!

Follow us in Twitter
4 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
mtete
mtete
3 months ago

What else can DPP do apart from opposing? As for the economic experts, they were there when DPP ruled and they failed to sway miserable givernment performance then.
Obviously Tonse Alliance style of doing things is totally different from that of the plundering DPP. Let’s give Chakwera/Chilim time.

Mwinithako
Mwinithako
3 months ago

Ngalamba yameneiyi,ingaziwa bwanji ngani ya ndalama mu Malawi???Yachekura ngalamba yameneyi

Mboba
Mboba
3 months ago

Those critics from DPP know nothing about economics….and failed Malawians for long .

Aaron Mwsambala
Aaron Mwsambala
3 months ago

In the importation and sale of goods and products, everybody wants their ‘cut’.. The term corruption gets a new meaning ..

Last edited 3 months ago by Aaron Mwsambala
Read previous post:
Chanthunya says Police manufactured evidence, appeal hearing 29 June

"The High Court erred in finding that circumstantial evidence proved beyond reasonable doubt that Chanthunya caused the death of Gasa."...

Close