CoVID-19 teaches Malawi the need to reduce her dependence on imports

Maravi Express

In his State of the Nation (SONA) address in Parliament today, February 3, President Lazarus Chakwera says his Administration will build on incentives pronounced in the last National Budget to promote and encourage local manufacturing, CoVID-19 has taught the nation of the need to reduce her dependence on imports.

He said in implementing its 2021/22 National Budget, “Government found itself in a situation where it had to meet a number of CoVID-19 related expenditures at the same time that domestic revenues were deteriorating due to the effects of CoVID-19 on taxpayers, and Government was receiving minimal donor budget support”.

“This led Government to incur a widening primary budget deficit, i.e. a budget deficit before payment of interest on loans, which was financed by domestic borrowing, which resulted in rising public debt.

The primary budget deficit incurred during the Financial Year ending 31 March 2022 is however projected to decline from 8.8% of GDP in the 2020/21 Financial Year to 7.3%. Though the decline is moderate, it does signal my Administration’s intentions to reduce the rate of borrowing and effect stringent measures to control public spending, some of which I will highlight a little later.

On future economic outlook, Chakwera said in 2022, the GDP is estimated to grow by 4.1% up from 3.0% in 2021, “on account of economic recovery measures being implemented by Government as contained in the Socio-Economic Recovery Plan (SERP)”.

“This plan acknowledges that the economy remains depressed largely due to the CoVID-19 pandemic and outlines interventions to reinvigorate it. Aside from the obvious investment in fixing the health system, we will continue investing in fixing the infrastructure system to create employment and attract future investments.

“We will also intensify our digitalization agenda to ensure people are able to work from anywhere especially home. Government will also build a resilient and sustainable Social Protection System by among other means administering safety nets, especially those that are productivity-enhancing.

“We expect the normalisation of global supply chains currently underway to improve trade and prices and contribute to GDP growth.”

The agriculture sector, Chakwera further said, “will continue to lead the GDP growth revolution in 2022 as Government continues to implement irrigation programmes and projects such as the Shire Valley Transformation Programme (SVTP), Programme for Rural Irrigation Development (PRIDE), and Malawi Watershed Services Improvement Project (MWASIP).

“Growth across the broader spectrum of the economy including Mining and Quarrying, Manufacturing, Transportation, Construction, and Wholesale and Retail Trade sectors will further prop up GDP growth prospects in 2022 as the economy becomes more resilient to Covid-19 following implementation of economic recovery measures.

“nnual average inflation is projected to continue on an upward trajectory to 9.6% in 2022 from 9.3% in 2021. This is owing to the continued rise in fuel prices and depreciation of the Malawi Kwacha.

“Notwithstanding, the country is expected to experience moderate month-on-month inflation especially when harvesting season sets in, thereby reducing pressure on inflation dynamics, as will our ongoing efforts to expand the export base.

“On the monetary front, the Policy Rate will be guided by the Reserve Bank of Malawi Monetary Policy, which will continue to be supportive of economic recovery efforts. Fiscal rules, medium term budgets and plans, and annual budgets are meaningless if expenditure cannot be controlled.

“Therefore, to ensure that public resources are utilised effectively, I am announcing the following measures to be implemented across Government in the course of executing the 2022/23 National Budget:

(a) A review of the benefits and entitlements of senior Government officials, including the Presidency and all Cabinet Ministers;

(b) A reduction in procurement of motor vehicles in terms of numbers, type and sizes;

(c) A requirement for Ministries, Departments and Agencies (MDAs) to seek Treasury approval before effecting new recruitments;

(d) A requirement for all Government institutions, without exception, to install and use pre-paid meters for utilities;

(e) Fast tracking the digitalization drive to reduce paperwork and fraud, which has already been added to the portfolio of the Minister of Information;

(f) Procuring security equipment and fertiliser directly from manufacturers instead of middlemen to cut landing costs;

(g) Fixing the perennial delays caused by people managing IFMIS by recruiting competent graduates in Accounting; and

(h) Operationalising the Debt Retirement Fund to deal with the rising public debt.

“Government revenues are projected to increase to 15.4% of GDP in the 2022/23 Financial Year from an estimated 12.4% of GDP in 2021/22 on account of current effects of domestic resource mobilisation efforts.

“Nonetheless, expenditure is expected to grow to 23.3% of GDP in the 2022/23 Financial Year, up from an estimated 19.7% of GDP in 2021/22, owing to short-term pressure on CoVID-19 related expenditure.”