Opposition PP, MCP Vary Opinion On Budget Reduction

Gondwe; Revised budget downwards

The two main opposition political parties in the National Assembly are holding varied views regarding the announced proposal to reduce the 2015/16 budget by K23.7 billion for the second half of the fiscal year.

People’s Party (PP) says the reduction of the approved budget of K929.7 billion will create more problems than solving them as Malawi Congress Party (MCP) welcome the move but only skeptical over promises that the country should expect good economic environment soon.

Minister of Finance, Goodall Gondwe announced on Friday in the National Assembly that Government has decided to revise downwards the 2015/16 budget for the upcoming second half of the fiscal year with cuts in some areas and prioritization on resources for important matters including food.

Finance spokesperson for PP in the National Assembly, Ralph Jooma said in an interview that it is sad to hear that Government would like to revise downwards the budget instead of asking the House to revise the budget upwards since the original budget value has been reduced by half due to devaluating local currency.

“We don’t welcome the reduction as PP, we should have been expecting an increase to total budget because the Malawi Kwacha has already lost its value.” He said 

PP is worried that original K930 billion budget passed in July was framed when Malawi Kwacha was pegged at K400 to a dollar. Now that Kwacha has depreciated by 100 percent where it is now being changed to a dollar at close to K800, the same amount can only pay half of the planned activities.

“Therefore we should have expected the Budget to be improved upwards in Malawi Kwacha if we are to achieve the objectives of this budget but coming here and say that the budget is being reduced even in Malawi Kwacha is a mockery and it is a disappointment to Malawians. What we expect is that people’s expectations will not be met, this budget will not achieve its objectives and it is a total waste of financial year for Malawian” said Jooma

Chakwera

However, Leader of Opposition Parties in Parliament and President of Malawi Congress Party (MCP) Lazarus Chakwera gave thumbs up for the Minister decision to revise the budget downwards.

He said his party was happy to hear the Minister admitting in his statement that things are not well in this country and more money will be borrowed for hunger response.

The MCP President said some of the promises in the statement including on stabilizing economy were not new yet nothing is happening  “But you will recall that in the past they have given us this week this month’s; staff like that. They tell us that there is hope at the end of the tunnel, I hope it is not an oncoming trend”

“There is not much that is new really” Chakwera added

He continued; “The performance of this administration leaves a lot to be desired and so because of the past history it is kind of hard to tell that they are now telling us the truth. We will have to wait and see” 

Gondwe led into the chamber

Minister of Finance when delivering his statement on Friday did admit that the economy is still passing through turbulent times. 

“I regret that we have not yet established a stable macroeconomic environment in which low inflation and interest rates prevail, and where the variability of the exchange rate is narrow and predictable.” He said 

Gondwe informed the House that Inflation has stubbornly remained high since the shock devaluation of 2012, apart from a short period between May 2014 to April 2015 when inflation decelerated to 18.2 percent, thereafter it has kept on crawling up to 24.9 per cent in December 2015.

But he assumingly said last month’s decline of the rate of inflation to 23.5 percent is a welcome sign of light at the end of the tunnel. 

“In general however, the rate has remained high at an average of 23 percent during the period in question. In the circumstances, interest rates have also remained high, with the policy interest rate at the Reserve Bank of Malawi remaining for a long time at 25 percent, and lately increased further back to 27percent. In tandem, prime lending interest rates at commercial banks have also remained painfully high.” He noted

Gondwe then touched on the power of the local currency which is facing sharp decline against major trading currencies. He offered hope that the point of equilibrium for the exchange rate has been reached already since free floating exchange rate policy was adopted in May 2012 and “it is therefore expected that the rate should stabilise soon and those speculations that are perpetuating the depreciation should take note of this."