MP Ganda says Covid-19 vaccination key to Malawi’s rapid economic recovery

Chairperson for the Budget Committee of Parliament, Gladys Ganda, has said the on-going COVID-19 vaccination drive will be key to rapid economic recovery.

Responding to the budget statement presented by finance minister, Felix Mlusu, on May 28, 2021, the Nsanje Lalanje parliamentarian said in Parliament on Monday that economic growth in Sub-Saharan Africa is expected to rebound to 3.4 percent in 2021 and 4 percent in 2022.

This, she said, is on the assumption that widespread COVID-19 vaccination will allow advanced economies achieve effective containment of the pandemic by the end of the year.

Gladys Ganda says Covid 19 vaccination key to economic recovery

“In the 2021/22 budget, growth in Malawi has been projected to recover in 2021 at 3.8 percent from a previous projection of 3.5 percent at the 2020/21 mid-year. Again, this is on the assumption that widespread vaccination allows effective containment of the pandemic by the end of the year.

“The distribution of vaccines is expected to ease the pandemic situation and bring economic activities back to the pre-pandemic levels. However, in Malawi, uptake of the vaccine has been very minimal. This House may recall that out of 360,000 AstraZeneca first doses, 19,610 expired and had to be incinerated publicly,” said Ganda, calling on Malawians to get vaccinated “otherwise the growth assumptions made by the finance minister will be deemed unattainable.

“Let us get the jabs. Let us contain this pandemic together,” said the MP.

On budget estimates, Ganda noted that the Government had prepared the 2021/22 nine months’ budget with the expectation that it would collect MK1.271 trillion during this period.

“Of the projected revenues 86.6 percent are domestic revenues and 13.4 percent are grants. Projected revenue estimates have decreased by 16.6 percent from a revised estimate of MK1.523 trillion.

“The Committee noted that after adjusting the 12 months revised estimate to 9 months there is an increase in revenues by 11.27 percent from the adjusted MK1.142 trillion to MK1.271 trillion. This implies that government will collect more in terms of revenues in these nine months compared to the adjusted nine months of the previous financial year,” said Ganda, adding that an analysis of the 2020/21 revised estimates against the 2021/22 proposed estimates reveal that domestic revenue will decrease by 7.16 percent.

“This indicates that the government would have only collected about 7.16 percent in the last quarter in the financial year to reach the 2020/21 revised estimate. The Committee is skeptical if this projection will turn into a reality. In fact, a comparison of the proposed 2021/22 estimate of MK 1.271 trillion and the 2020/21 adjusted revised estimate of MK1.142 trillion reveals that domestic revenues have increased by 11.27 percent.

“This means that domestic revenue will only cover 55.34 percent of the total expenditure. This will inevitably lead to more borrowing to cater for the deficit hence increasing stress to the country’s ever-growing debt,” said Ganda.

The Nsanje Lalanje parliamentarian called upon the government to explore more measures which she said would boost revenue collection and not worsen the condition of the revenues.

When commenting on Foreign and international grants, Ganda noted that grants from foreign governments are projected at MK58.43 billion representing a 45.43 percent hike from the 2020/21 revised estimate of MK40.17 billion, and that grants from international organizations are projected to decrease by 62.38 percent to MK111.88 billion in the 2021/22 financial year from a 2020/21 revised estimate of MK297.37 billion. She said this is not surprising because the increase in the grants in the 2020/21 financial year was attributed to the inflow of Covid-19 related funding.

On expenditure Ganda noted that total expenditure for the 2021/22 Financial Year is projected at MK1.99 trillion representing a drop of 14.8 percent from the MK2.34 trillion 2020/21 revised expenditure estimate. From last year’s 9-month adjusted expenditure, however, she said her committee is aware that expenditure has in fact increased by 13.6 percent. This, she said, is in contrast to a 11.3% increase in revenues which implies that expenditures have increased at a rate higher than revenues.

“This trend has persisted in the recent past and has led to widening deficits and hence ever-increasing debt. The Committee, hence, echoes its viewpoint for the government to contain public expenditure to sustainable levels and learn to achieve the most with less,” said the Budget and Finance Committee Chair.

Commenting on the Instability of Kwacha, the Budget Committee Chair noted that the Malawi Kwacha has not been stable, “depreciating left, right and centre, from K714/US$ in May 2020 to K800/US$ in May this year; from K841.6375 per Euro to K1033.9168; from K 916.0031 per Pound to 1188.2269; K42.6285 per RSA Rand to K62.0350”.

“The Committee has no choice but to question the low inflation projections given by the Minister,” she said.

Ganda took a turn on the external sector and she noted that Malawi continues to register a negative trade balance and the gap continues to widen. “Malawi’s export basket continues to be highly dominated by agricultural products with tobacco alone claiming over 51 percent (US$ 370 million),” she said.

“Sugar and coffee exports claimed 10 and 11 percent share of total exports respectively. This implies that a basket of the three agricultural products accounted for over 70 percent of Malawi’s export products,” said the Chair.

Ganda has since advised the government to ensure grants are well-managed as well as to improve general public finance management so as to increase donor confidence to sustain the inflow of grants. She encouraged the government to seriously monitor budget overruns by revising estimates at midyear according to changes in revenue.

“In terms of financing, the government should prudently borrow domestically while pursuing more of conditional external financing by engaging International Financing Institutions (IFIs) with the overall aim of reducing the cost of the debt stock and guarding against the risk of future debt distress.

“In the current situation where growth in expenditures outpace revenue growth, the government needs to contain public expenditure to sustainable levels and improve efficiency in the public service in order to achieve the most with less.

“With the rising debt levels and a general preference for domestic borrowing in Malawi, the Committee recommends strict fiscal consolidation. Instead of the high domestic debts, the government is further advised to explore less expensive foreign loans,” said Ganda, adding that the government needs to focus energies on growing the economy and widening the resource base.

According to Ganda, this requires serious investments in strategic sectors like commercial agriculture, mining, manufacturing and energy.

She said that with underperforming non-tax revenues and reports of inefficiencies in some parastatals, the government needs to promptly work towards reforming service delivery in public service.

“The Budget Statement painted an optimistic picture and indeed, it presented lofty ambitions. We support these ambitions. In fact, we should all support these ambitions. But we have to do so by being realistic. We have to make do with the facts and figures and the projections should be made against that background,” Ganda said.

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