Parliamentary Budget Committee Pessimistic With Malawi Projected GDP Growth Of 5.1 Percent

Chiphiko: Nation needs to pray 5 times a day to achieve such ambitious rate of growth

The Parliamentary Committee on Budget says nothing tangible for this year’s Budget to make the Malawi economy register real GDP growth rate from 3.1 to 5.1 percent.

Chairperson for the Committee, Rhino Chiphiko finished presenting the Committee's findings on Tuesday in the National Assembly, a response to Minister of Finance Goodall Gondwe's recently presented K1.136 trillion national budget estimates in the National Assembly for the 2016/17 financial year.

Parliamentary Budget Committee Chairperson, Rhino Chiphiko says his Committee established that the only positive areas in the budget has been large allocation to the Ministry of Agriculture which represent 17 percent of the total national budget and allocation for the food purchase.

The committee further noted the proposals to reform the Farm Input Subsidy Program and plans in Public Finance Management.

However, the Budget committee found number of worrying developments in the Budget which led the Committee to conclude that Malawi will fail to achieve real growth.

"Mr. Speaker Sir, events in the natural, or, Act of God, and in the human realm portend a difficult future. Climate change and extreme adverse weather events, unstable exchange rate, persistent high inflation, high interest rates and constrained fiscus, all portend a sluggish and depressed economy. An economy is in an Intensive Care Unit (ICU) like a patient on a Life Supporting Machine. Malawi is in an economic crisis." emphasised Chiphiko with urge that "But we must do something" mentioning lowering of interest rates and boost industrial production.

In the Committee findings presentation, performance of many sectors in the Malawi will be adversely affected by poor performance of the Agriculture sector as it is apparent that climate is still affecting the sector yet Malawi continues to depend on the sector.

According to Chiphiko, later in an interview said Malawi may this year register a negative 2.5 growth rate and not surpass the average growth in the regional which is around 3 percent. He said the committee believes that Ministers projected growth figure will need the nation "to pray more than 5 times a day in order to achieve such ambitious rate of growth."

Chiphiko said the budget has large allocation on expenditure for the public debt charges and interest repayment and that this will make Malawi fail to meet Millennium Development Goals as less has been allocated to the Development programmes.

His committee further notes that interest rates in banks remains stubbornly high making lives of many to be unbearable in the year which 8 million Malawians will face food shortage.

The Committee emphasise that interests rates must be revised downwards to make people able to borrow from banks and able to repay loans at reasonable rates. 

The Committee has among others noted that number of tax proposals cannot lead to any economic recovery and may even push the economy deeper into recession.

MSB Sale Unstoppable Says Goodall As Parliamentary Committee Halts The Sale

Chiphiko listening to Petition on halting MSB sale

Malawi Savings Bank (MSB) sale will not be stopped confirms Finance Minister Hon Goodall Gondwe, amid adoption of the Budget and Finance Parliamentary Committee’s report  in the National Assembly which calls halting the sale of the Bank.

The Report was adopted on Wednesday evening by the house which asks recapitalization of the bank and sale it later if necessary.

Chairperson for the Committee Hon. Rhino Chiphiko when presenting the report noted that the sale of the bank is motivated by interest of very few business individuals connected to the ruling party including one major FDH shareholder Mr. Thom Mpinganjira.

He said the determination of the real value of the bank was a guess work as such the bank is going away on a giveaway price. Ina addition he said having one bidder which is FDH bank for such a big asset “Has heavily compromised on transparency and fairness of the process”

The committee said it was informed that the FDH bank had offered K4.9 billion for purchase of 75% shares in MSB.

After presenting the report which has been noted by the whole house on Wednesday, Chiphiko in an interview likened selling of the bank to FDH, to “Goat eating a Cow” as the bank is too small to buy the biggest bank in Malawi with number of branches across the country.

Chiphiko noted that since the house has adopted the report any process of selling the bank would be challenged in court by the house.

“The process of selling the bank should be floated on the Malawi stock exchange” said “I’ve been told that the stakeholders who would like to buy the bank are at the Capital Hotel to sign the papers, they can go on and sign the papers. But we’ve got the case here. Parliament will go to court because the report has been adopted by the whole house. And the house is the representative of all Malawians so the sale will be challenged if it continues” said Chiphiko

He said the committee also fear that the sale of the bank will lead to lay off of about 630 employees just like how previous privatized companies had done.

Chiphiko said the committee emphasized the need to recapitalize the bank with K4.5 billion that is required to make it stand on its feet so that it can meet Basel II requirements and possibly sale it after 3 to 4 years when it is in good shape and not at its weakest as it is now.

Meanwhile Minister of Finance, Economic Planning and Development Hon. Goodall Gondwe while describing reports that the bank has been secretly sold as of Wednesday ‘hearsay’, he said the sale of MSB is unstoppable what remains is when and how.

He said though government will go for analysis of what has been said both by experts and parliament but said selling the bank is the best recapitalization as alluded to the report and other calls being made since government will be free of any obligations of controlling the bank.

“The House did not stop the government from selling the bank, they noted the report and there was no vote passed.” Said Gondwe

“We are selling the bank because we are being forced by the Basel II requirement where we are considering the recapitalization of the bank. I expect that it will no longer be the responsibility of the government to constitute and meet the requirement of Basil II it will be the new management responsibility” he said

“All experts recommended that we should sell the bank and the only difference was when and how that should it be done and that was left for us to decide.” Added Gondwe

“In our case we have to decide when and how to sell the bank. If we don’t sell the bank the depositors will lose all their money is that what we want? Because the bank will find it difficult to find the money to pay the depositors when they want their money out if we don’t sale it. But we have an obligation to ensure that depositors do not lose their money”

Asked if he is afraid of the warning that the house will challenge the decision in court, Hon Gondwe said “No!, no, no, the courts are there for all of us to appear there, we will go to court and follow them, that is not a problem”