LILONGWE (Brian Ligomeka, News24) – Malawi’s Finance Minister Goodall Gondwe on Friday unveiled a $1.6bn national budget for the fiscal year running from July 1, 2016 to June 30, 2017. This comes as Malawi struggles to feed more than 8 million people facing hunger with barely enough budgetary support from a small pool of donors.
Admitting to Parliament that the budget will be implemented at the time the Southern Africa nation is facing a myriad of challenges, prominent of which is hunger, Gondwe observed, “We will implement the 2016/17 national budget at the time we are facing a financial crisis”.
According to Gondwe, total revenue and grants during the 2016/17 fiscal year are estimated at $1.3bn or 22.2% of nominal GDP.
While government plans to rake in large percentage of revenue from taxes and grants, the Peter Mutharika administration will have to tackle a deficit of $242m, which Gondwe has said will be financed by local and foreign borrowing.
Battered by El-Nino-propelled drought, Gondwe disclosed that Malawi has allocated $50m to be used for the securing of 1.4 million metric tons of maize.
“Malawi is facing yet another wave of food insecurity, this time occasioned by the El Nino climatic episode….Maize production has been estimated at 2.4 million metric tons before adjusting for post-harvest loses. Importantly, it is estimated that the country requires an additional 790 000 metric tons of relief food to support an estimated 8.4 million people,” said Gondwe.
He added: “An additional 250 000 metric tons is required for sale, while another 250 000 metric tons is required to restock the strategic grain reserves.”
With government depending on local resources to finance more than 80% of the budget in the absence of adequate budgetary support, Gondwe has announced several tax policy and administrative measures for the budget.
He justified the new measures as a means to broaden the tax base, improving tax administration, removing economic distortions to spur production, and encouraging compliance.
Among other measures, Malawi has introduced the standard VAT rate of 16.5% on products which are currently zero-rated or exempted.