THE 2020/2021 MIDYEAR BUDGET REVIEW RESPONSE BY DEMOCRATIC PROGRESSIVE PARTY (DPP) DELIVERED IN THE NATIONAL ASSEMBLY BY HONOURABLE. JOSEPH MATHYOLA MWANAMVEKHA, MP
MONDAY, 1ST MARCH 2021
- Madam Speaker, I rise to contribute to the debate on the motion of the 2020/2021 Midyear Budget review, which was presented to the August House by the Minister of Finance, Hon Felix Mlusu, on 26th February 2021.
- To begin with, Madam Speaker, allow me to most sincerely and profoundly thank the former President of the republic of Malawi His Excellency Prof. Arthur Peter Mutharika, and the President of the Democratic Progressive Party (DPP) for his continued confidence and trust bestowed in me to serve as the party’s spokesperson on Finance. I do not take this gesture lightly nor for granted.
- Secondly, Madam Speaker, I wish to note the brevity of Hon. Minister of Finance for standing before this August house to present the 2020/2021 Mid-term budget statement. Like I said in September when I stood here to respond to the National Budget, the Minister has demonstrated this brevity by accepting the appointment of Minister of Finance at time when the country is still at the crossroads.
- He was tasked to deliver unattainable and insurmountable promises which he was not party to. I still feel sorry for the Honorable Minister of Finance and we will still keep him in our prayers.
- Madam Speaker, if you may recall I gave a penta dimensional description of the 2020/2021 budget under review now. I would like to reiterate my position that the 2020/2021 National Budget still remains consumptive as opposed to development-oriented, unfriendly to the business sector, unrealistic, overburdening in debts and total loss to Malawians, and today, I would like to add that it has nothing to offer to the ordinary man.
- Madam Speaker, as they say, time is the best judge, I feel vindicated almost six months down the line, it is sad to note that Malawians are still hopeless as the new captain they entrusted with the responsibility to steer the ship has met a storm and hit a rock in the process and subsequently lost the direction instead of going to Canaan is now heading towards Baghdad, the Capital City of Iraq! Malawians feel cheated and are now missing His Excellency Prof. Arthur Peter Mutharika’s leadership. They have now realized that indeed Chitsime chimadziwika kuya chikaphwa!
- Madam Speaker, what is more disturbing is that the captain seems to have lost all his senses and he is helpless! This captain must be fired and we get the previous captain to steer it.
- Madam Speaker, as am saying this budget is off track because it has missed both the revenue and expenditure targets. Instead of collecting domestic revenue of K600 Billion during the period under review it only collected K564 Billion representing a shortfall of K 36 Billion. While on the expenditure side instead of spending K 975 Billion it spent K 998.5 Billion representing an increase of almost K 24 Billion, resulting in net borrowing of approximately K30 Billion as at end of December 2020. Furthermore, instead of borrowing MK266.3 billion at end of first half, this government borrowed MK350.9 billion of which MK304billion was borrowed locally, thereby overcrowding the private sector.
- Madam Speaker, am also saying the budget is unrealistic because as the minister has said currently foreign reserves have been depleted from US$846.6 million in December 2019 to US$ 574.3 million in December 2020. This means, Madam Speaker, that this MCP government is failing to generate enough forex reserves. Malawians should brace for tougher times ahead as they will scramble for the little foreign exchange reserves. If they are lucky to get these reserves, they will get them at a much higher price than it was under the DPP government.
- This Madam Speaker, would be exacerbated by the widening of the trade deficit where the country is exporting less than what it importing. This therefore, means, as alluded to above will lead to the continued depreciation of the Malawi Kwacha against the currencies of the country’s main trading partners including the US dollar, Euro, Chinese Yuan and South African rand. As the Malawi Kwacha is depreciating the inflation will also be increasing as there is a positive correlation between the exchange rate and inflation. Madam Speaker, I would like to refer the August House to my MA thesis which is available at Chancellor College and the Reserve Bank of Malawi libraries and this has also been confirmed by a number studies by renown international economists. Therefore, the projection that the annual headline inflation will average 7.4 will not hold. It is also surprising that the Minister of Finance is projecting an average headline inflation of 7.4 while the central bank is putting the same at 7.8 at the year-end, the question is which is which? Does this mean the Minister of Finance does not talk to the RBM Governor?
- Madam Speaker, it is also surprising that the Minister has omitted the exchange rate in his key assumptions based on which the budget has been prepared and yet exchange is a key macro-economic fundamental in the budgeting process.
IMF EXTENDED CREDITF ACILITY
- Madam Speaker, On the IMF extended credit facility, I would like to put the record straight that the then facility was on track, however, due to the unplanned expenditure relating to Covid-19 and the Fresh Presidential Elections on 23rd June made the program unattainable in the post elections period. That’s why we continued to get budget support until June 2020. It is against this background that we are asking government to facilitate negotiations with the IMF so that Malawi can start getting donor support to allow government meet the targets as provided for in the midterm budget.
- Madam Speaker, am saying this is a consumptive budget because in the first half total expenditure was K998.5 Billion consisting of
K 830.1 Billion recurrent expenditure and K 168.4 Billion in development expenditure. This means that 83 percent of the expenditure in the first half was consumption!
- Madam Speaker, in the second half, the Minster is projecting that total net expenditure will hover around K 1.336 Trillion of which K888.1 Billion will be recurrent expenditure and K447.4 Billion will be development, and the Minister is also extending to indicate that out of the K447.4 Billion, K395.7 Billion will be foreign financed and K51.6 Billion will be locally financed, this implies that we as a country will only contribute 11 percent from local resources towards development budget. Madam Speaker, this is worrying because it means without donor support, Malawi will never develop. This level of donor dependency is not inspiring to say the least!
PROMISES AND LIES
- Madam Speaker, am also saying Malawians have also lost out in the 2020/2021 budget because most of the promises that were made by the MCP Government are missing out.
- Madam Speaker, allow me to refresh minds of all Malawians through this August House on some of the flagship promises that have not been fulfilled by the MCP Government as follows;
- The K15,000 monthly Allowance for the senior citizens aged 65 and above;
- Nonrenewable driver’s license at K14,000
- The tax free week holiday;
- The mega farms every constituency
- The one million jobs in the first year of the MCP Government;
- Obtaining a Passport at a reduced price of K14,000;
- The 400 modern roads within 8 months of MCP administration;
- The construction of Health Centers on every 7 kilometers;
- The much talked about three meals a day;
- The bullet train from Blantyre to Lilongwe just to mention but a few.
- Madam Speaker, it is refreshing to note that the Minister of Finance is telling us that the free electricity and water connections will be implemented in the next budget. I hope that government will not remove the connection fees on one hand and raise the water and electricity tariffs on the other. If that happens, then you will be cheating Malawians and we on this side of isle would not accept that.
- Madam Speaker, perhaps the question we would like to ask the Government; is how long should Malawians wait for the fulfilment of the rest of promises? In his own words the Minister says the implementation of the above promises awaits policy formulation. The MCP government has not been ready to govern. The MCP government is not ready to govern. The MCP government will never ever be ready to govern. It is all promises and lies. The President lied to the nation that he will not accept to be installed the chancellor of public universities, but the reality is different.
THE COVID-19 NATIONAL REPONSE
- Madam Speaker, as stand here, I also feel vindicated since I pointed out that the MCP maiden budget was elusive on the risk allowances for our dedicated and hardworking teachers. We, on this side of the isle were shocked with the inconsistency and contradictory remarks by the Minister on the government side indicating that Teachers are not at risk and therefore they do not deserve getting risk allowances and on the other hand she is saying teachers will be the first ones to get vaccinated as they are at risk! Madam Speaker, this is contradictory and baffling! To be realistic and fair, Madam Speaker, teachers deserve risk allowance the same as our men and women in uniform.
- Madam Speaker, we are made to believe that the social cash transfer has been extended to the urban-and semi urban areas; Thus far they have been paid for the months of January and February and they are yet to be paid for the month of March. We therefore demand the line ministry to furnish this August House with a report addressing the following questions; who are the beneficiaries and how they were identified; the number of beneficiaries and how much each is getting; and lastly, we want to understand the geographical distribution; Furthermore, we would also kindly request government to negotiate with the donors to consider extending the facility to at least three months as we don’t know when the pandemic will be conquered!
- Madam Speaker, although we are not sure as to how long the pandemic is going to be with us, it is very important to begin planning for life after the Covid-19, how do we support our SMEs to bounce back after the effects of the pandemic? We should not pay a blind eye to the fact that we still need the SME’s after the pandemic. DPP is therefore asking government to come up with a post Covid-19 recovery plan as is the case elsewhere!
PURCHASE OF MAIZE
- Madam Speaker, on the purchase of maize, let me begin by asking government to commit resources to ADMARC and NFRA from this budget dedicated to maize purchase. We cannot rely on the proceeds from the maize sales of the previous maize stocks because of issues of post-harvest loses and ADMARC’s inefficiencies.
- Madam Speaker, we cannot wait till June or July to start buying maize because by that time the vendors would have mopped up the grain. We urge Government to stock enough maize to support people in areas that have been badly affected by the dry spells like lower shire, and some parts of the Southern and Eastern regions. We would also like to challenge the MCP Government to walk the talk on the promises of offering better prices for agricultural produce so that farmers get value for their sweat.
- Madam Speaker, it is high time that government should lend a listening ear to what we have been saying in this August House. Some six months ago I stood here protesting the 16.5 percent VAT on the cocking oil. As I stand here today that decision has already reared its ugly face on the people and the economy. In September last year I warned government that the introduction of the VAT meant an outright increase in cocking oil prices. Madam Speaker, the August House may wish to know that cocking oil price for a 5 litre bottle has increased by almost 100 percent from around K5,000 to about K11,000 from September last year todate! This Madam Speaker, has given room to smuggled products from the neighboring countries to flourish and Malawians can no longer afford the locally produced cocking oil thereby drastically affecting local production.
- Madam Speaker, we used to have the MVAC program through which government used to distribute food to the poor and vulnerable Malawians from September to March of the subsequent year. Therefore, we would like to understand why this fiscal year government is quiet on the same and yet you promised the three meals a day and yet some people cannot afford even a single meal a day.
PAYMENT OF ARREARS AND CREATION OF DEBT RETIREMENT FUND
- Madam Speaker, we on this side of the isle, would like to ask government to quickly settle and retire the huge private sector debt/arrears to allow the private sector to thrive during this pandemic. I hope the promises made in this midterm budget will not be a mere political rhetoric.
INTERNATIONAL CREDIT RATING FOR MALAWI
- Madam Speaker, DPP agrees with government to obtain an international credit rating for Malawi in order to facilitate the country’s access to international finance. However, I would like to warn Government to tread carefully on this matter because if Malawi is poorly rated, for example as a junk, it completely closes the window to borrow not only from the international market but also from multilateral institutions.
- As I conclude Madam Speaker, I would like to emphatically inform this August House and the entire nation that the only party that delivers what it promises is the DPP under the leadership of His Excellency Professor Arthur Peter Mutharika. We are fully aware that Malawians are regretting on the choice they made on 23rd June 2020 but they should not despair as DPP is coming back in 2025!
Madam Speaker, I submit