Public Finance Managent Reforms May Return Donor Support to Malawi

The European Union (EU) has given hope that Malawi may secure budgetary support from its bilateral donors if the country successifuly implement Public Sector Management Reforms.

Malawi is rebuilding itself by implementing number of reforms including tightening public finance management having lost budgetary support from bilateral donors following scandal which revealed massive theft of public money by public officers dubbed cashgate.

And when presenting K901.6 billion 2015/2016 budget statement, Finance Minister Goodall Gondwe indicated that donors are not coming back soon and that the budget has been framed with a view that Malawi will use its domestic resources to finance activities. He also mentioned that that some social sectors shall receive additional funding through off-budget.

Head of EU Delegation to Malawi, Ambassador Marchel Gerrmann said donors are eager to support Malawi to achieve its objectives.

"There is still an option of budget support. If the minister is implementing the public finance management reforms then also the next option is available.” Ambassador Gerrmann said, “Often times is important that definitely Malawi will stand on its own feet where it will have to find from domestic resources for its programmes."

But he also noted that in the mean time there is a lot of support coming through off-budget supporting government priorities.

"A lot of it is also mentioned from this budget and I think that is step forward of the minister as compared to previous year. I think that the minister is quite transparent of the support of the donors in the budget and that is appreciative." said His Excellence Gerrmann

He also commended that the financial situation of the government this year will be tight as Minister said that there is not to be much room to maneuver.

"I believed that the minister mentioned a number of important reforms in particular reform of FISP. I think it is very important that this programme is reformed and we are looking forward to that." Said Ambassador Gerrmann, who continued "The other important of reforms is Public Finance Management Reforms. I believe that that implementation of PFMR is crucial to restore confidence in the public finance in the government."

The he assured that development partners will from their end, support government in trying to achieve its objectives.

Education Budget Worries Parliamentary Committee

Finance Minister Goodall Gondwe walks into
The chamber to present 2015/2016 budget

The promise made by the Finance Minister Goodall Gondwe that enough money is made available in the 2015/2016 Budget for the recruitment of about 10,000 teachers seem to be a mare rhetoric if what the Parliamentary Committee on Education is to go by.

Various Parliamentary Clustered committees  are in their first week of budget scruitny but the education committee has already raised fears that the money allocated to the education ministry is meagre fueling worries that this financial year the ministry will operate effectively including possibility of recruitment of 10 thousand new teachers.

In an interview Chairperson for the committee Dr. Elias Chakwera says the committee in its first day of budget scrutiny has observed with concern that a number of sections in the ministry of education there are shortfalls in terms what the ministry had requested to the treasury and money given to them. 

He pointed out Personal Emoluments vote allocation which has shortfall at around 15.1% yet this is the vote which must have adequate funds to recruit teachers which are about 10,000, he said.

Ministry of Education Science and Technology has his year received K109.8 billion from K90. 8 billion a revision from K81.68 billion last financial year.

"We started with an overview of ministry perspective of what they had asked for and what has been allocated" he said ”In a number of sections there are shortfalls in terms what the ministry had expected and given to them."

Chakwera said the committee noticed that Personal Emoluments vote allocation is short at around 15.1% yet this is the vote which must have adequate funds to recruit teachers which are about 10,000.

The Education Committee chair then indicated that they are going to be looking at subsector by subsector to quantify the shortfall vis-à-vis the expected output which is going to be affected following the short falls.

When presenting the budget Finance Minister honorable Goodall Gondwe mentioned that recurrent expenditure allocation of K674.6 billion, is proposed to increase wages and salaries by an amount that will raise the salaries of the junior grades in the public service. The budget also provides for the recruitment of some 10,500 primary school teachers and 466 secondary school teachers, who are projected to join the civil service during the last quarter of the financial year. 

"These initiatives as well as an annual wage creep scheduled for implementation in December 2016 will raise the wage bill from K198.0 billion in 2014/15 to an estimated K228.7 billion." Added Gondwe

Man Sentenced to 6 Yrs for Sodomy of An Epileptic Man

A man who was arrested for Sodomy of an epileptic man in Ntcheu district has been sentenced to 6 years imprisonment with hard labour.

Mr Tokha Nasoni aged 26 was recently arrested for sodomy of Mr Pilirani Thomson aged 20 who has epileptic condition. Both the convict and the victim hails from Ngalande village of T/A Njolomole in Ntcheu district.

First Grade Magistrate Jones Masula when handing over the sentence did not accept the accused leniency request that he looks after his grand mother and two siblings.

The magistrate argued that the accused might have known his responsibilities before committing the offence, adding that the offence is a felony punishable with 14 years Imprisonment with Hard Labour.

The court also considered taking advantage that the victim was a man of unsound mind as one of aggravating factors.

The 6 year sentence is effective from his time of arrest.

Buggery (Sodomy) is contrary to Section 153 sub section A of the Penal Code which attracts a maximum sentence of 14 years.

Economic Experts Urge Govt To Allocate More Resources for Investment

Hon Goodall Gondwe being led by
Sergeant at Arms into the Chamber to
Present 2015/2016 budget 

The budget statement for the financial year 2015/2016 continues to receive varied response among politicians and experts, but one thing in common has been a more emphasis on the need to start framing budget that focuses on stimulating productivity and investments.

The K901.6 billion budget estimates presented last Friday by hon Goodall Gondwe, the Finance Minister, has an allocation of K224 billion for development expenditure. 

Henry Kachaje 

President of the Economics Association of Malawi (Ecama) Henry Kachaje, observed that the budget lacks emphasis on investments in the economically productive sectors. He said, now that donors are not likely to support Malawi in its budget, a focus on investment is the right option for Malawi economy.

He further noted that Economic growth which the Minister indicated in the statement is not substantiated by factual evidence of where that growth would come from adding that in a number of areas, the minister was failing short of committing the reforms government is going to undertake by this budget.

“It’s a budget statement that has left us still wondering whether what we are hoping to achieve as a country may be achieved” said Kachaje, as he referred to the Finance Minister's emphasis of hope for resumption of donor aid while acknowledging unlikeliness of their comeback soon.

Dalitso Kubalasa 

Dalitso Kubalasa, Executive Director for Malawi Economic Justice Network (MEJN) 2015/2016 said this budget statement was interesting not so much as a surprising statement because of Finance Minister’s acknowledgement of known tough things Malawi is still sailing through.

But he said the budget has some courageous decisions and very cautious on what is been committed in this budget.

A bit different from Kachaje observation, Kubalasa noted that government has prioritized economically productive areas including the need for further input from stakeholders on challenges facing the fertilizer subsidy programme.

“Another striking element of the budget though no details were explicitly made is on Input subsidy programme where government is acknowledging challenges facing the programme and the need to discuss them with stakeholders.” said Kubalasa

Opposition PP, MCP Holds Different Opinion Over 2015/2016 Budget

Finanance Minister Goodall Gondwe

The two main opposition parties in Parliament have different opinion regarding hope that 2015/2016 financial year budget estimates will promote investiment and production.

Finance Minister Honorable Goodall Gondwe on Friday, announced K901.6 Billion budget estimates which the minister said will be domestically financed and other social sectors will be supported through off-budget from donors. 

Both, Malawi Congress Party (MCP) and Peoples Party (PP) had expectations that the budget shall allocate more resources for investiments and incentives for businesses.

The finance Minister announced that from K901.6 billion, the recurrent expenditure will be K674.6 billion, while development expenditure will amount to K224.0 billion from revised K189.2 billion in 2014/15 budget.

Gondwe said from this Development expenditure, some K173.0 billion will be funded by external resources (development Part I), while K50.0 billion will be funded using domestic resources (development Part II).

“Yes somehow we see positive steps because we can see that about 26% of the budget will be for the development” reacted Ralph Jooma PP spokesperson on Finance matters in parliament and acknowledged government saying it is a way to go for economic progress.

He said is happy to note that K5 billion will be forwarded to councils to address issues of grassroots development, K6.5 billion for the improvement of city roads, while K3 billion for students loan and grants.

Hon Ralph Jooma: This is an investment based
Budget 

He further noted with appraisal that awarding of contracts will be based on assessing number of Malawians to be employed by the company saying this will empower a lot of Malawians.

However, Jooma did not welcome Finance Minister’s decision to allocate few resources to some social sectors because are to receive off-budget funding. Hon Jooma said such is a worry some development since off-budget from donors are often unreliable and moreover, government has no control over such support including on selecting priority areas to which such support should be directed to.

“We can’t rely on that” he said, “As members of Parliament I think we should look at budget and not anything off-budget financing”

He also demands the explanation of the breaking of the allocated K7 billion for decent houses of which the minister admitted that only K2 billion has been used.

Malawi Congress Party (MCP) who earlier said expected the budget that; is explicit on how government intends to solve mess in Subsidy programme; offer incentives to businesses and clears outstanding arrears, has described the whole budget as “Not Pro-Poor and not stimulating Productivity.”

Hon Joseph Njobvuyalema: This is not pro-poor
Budget and does not promote productivity

In his view, Hon Joseph Njobvuyalema MCP spokesperson on finance matters in parliament says “Government should look at real sectors in the country which would promote growth and productivity. That’s not what we have done and it is disappointing”

He said though the budget has allocated more resources to Agriculture, it fall short of comprehensive strategies to sustain the sector in times of calamities especially droughts. He suggested that the budget should have emphasized on irrigation.

The MCP spokesperson emphasized that this budget should have put much focus on strategically allocating resources as means to boost the productivity in agriculture especially on irrigation schemes, commercializing the sector, livestock production even on the tourism and mining sectors.

“The poor people will not benefit” he said, “Mostly they are also budgeting on off-budget, donations these things are outside our plans and we cannot trust that they can stimulate our productivity.” 

He said government has misdirected its priorities in the budget which he also said the budget has only reflected views of professionals and not poor Malawians “It is a very disappointing plan” he added.

Get full budget statement hereRead or Download

Telecommunication, Custom Duty Fines, Customs Form 12 Goes Up To Support 2015/2016 Budget

Goodall Gondwe Finance Minister 

Minister of Finance presented 2015/2016 budget estimates which largely rely on perfomance on domestic revenue and off-budgetary support from donors.

Suggestively, such a budget shall see Malawians to dig more in their pocket when accessing some services due to tax regime that will concentrate on broadening the tax base in order to generate more domestic resources as well improving administrative efficiency, encouraging tax compliance. 

Likely, in this situation government has been left with no other choice but to raise custom duty on some potential tax revenue generators.

So, get prepared for the new cost of SMS, Internet, Customs and Excise form 12,  Customs Procedure Code for Specialized Broadcasting Equipment for Direct use in Television and Radio Stations (CPC 480) and Customs and Excise Duty Fines though some rates have been reduced.

Minister of Finance Goodall Gondwe when announcing the new tax measures indicated that the amendments were made following various insightful and constructive proposals received during this year’s pre-budget consultations, though a number of them may be considered for future budgets. 

"Mr. Speaker, Sir, the Customs and Excise tax measures to be announced today will become effective from midnight tonight, whereas the Value Added tax (VAt) and Income tax measures will be effective on 1st July 2015, once the relevant bills are passed by this House." He announced 

Increased Customs And Excise Duty Measures

Hon. Gondwe announced that, following the tremendous uptake of the telecommunication services in Malawi, and in order to expand the tax base togenerate resources for this budget, 10% excise duty will be levied on text messaging and all data transfers including internet and similar services. He noted that Government removed customs duties on mobile phones in order to improve access to mobile telecommunication. And went further to remove customs duty on solar cellular telephone chargers. 

Government has removed henceforth, Customs Procedure Code for Specialized Broadcasting Equipment for Direct use in Television and Radio Stations (CPC 480). Such equipments were imported free of Customs duties, VAt and Excise duty, in order to improve information dissemination in Malawi. 

The finance Minister contented that objectives of removing customs duties have been achieved as there is now a proliferation of television and radio stations in Malawi, creating competition in the industry which has given Malawians options to choose from.

Threshold Value for Entry of Goods on Customs Form 12 has been increased from K100,000.00 to K500,000.00 so as to reduce the time spent at the port of entry for small and medium business people or travellers who import goods from neighbouring countries, and to support the ‘Ease of doing Business’ initiatives that the Government is undertaking.

Customs and Excise Duty Fines has been revised upwardsin order to provide for meaningful cost sharing and recover the value eroded by inflation. Now, the minimum fine has gone up from K10, 000.00 to K100,000.00, as the minimum fine in the Customs and Excise Act has been eroded with inflation and does not cover the cost of enforcing compliance. 

Reduced Rates in Excise Duty 

Excise Duty on some Imported Vehicles Government has reduced excise duty rates on motor vehicles under the Customs and Excise tariff Heading 87.03 with an engine capacity exceeding 3,000cc in order to encourage tax compliance.

Excise Duty on Dry Cell Batteries that operate light torches and radios used by most Malawians, especially in the rural areas has been reduced from 30 percent to 10 percent.

On Regional Trade Agreements, Malawi is to migrate to Customs and Excise (Tariffs) Order to COMESA Common Tariffs Nomenclature (CTN) and this will be published in the Government Gazette.

The budget statement furhter indicates that there shall be Taxation Act Amendments including on Tax Policy and Administrative Measures, Amendments of the Malawi Revenue Authority Act, and Amendments of the Value Added Tax Act.

Reed full budget statement Read or Download

Goodall Unpacks K901. 6 Billion Budget Estimates for 2015/2016

Hon Goodall Gondwe Arrival at Parliament 

The Minister of Finance, Economic Planning and Development Honorable Goodall Gondwe has unpacked the estimates on the recurrent and development accounts for the budget of the 2015/16 financial year on Friday afternoon in the National Assembly.

Now, the budget has been referred to the committees of Parliament for two week scrutiny before they are considered by the Committee of the Whole vote by vote, and that, thereafter, they be adopted.

Gondwe announced that the total expenditure and net lending in the 2015/16 budget is projected at K901.6 billion “Although this appears to be higher in money terms than the 2014/15 revised total expenditure of K800.7 billion, it is actually lower in real terms." He said



The 2015/16 budget constitutes 26.2 percent of GDP, while the revised budget for 2014/15 accounts for 28.4 percent of GDP.

The recurrent expenditure will be K674.6 billion, while development expenditure will amount to K224.0 billion. Therefore, the share of goods and services that will accrue to the public sector is projected to be lower in 2015/16 than that consumed in 2014/15 Said Gondwe

When making his presentation, Hon Gondwe acknowledged uncertainty of receiving budgetary support from bilateral donors though Malawi is sealing loopholes that led to theft of public money dubbed cashgate. 

He did not even hide to mention that the budget has not only seen a decline in donor budgetary support, but dedicated and project grants as well. 

The Finance Minister however, told the House that more support from donors to Government ministries, departments and agencies shall largely be through off-budget a development which will see votes, particularly those in the social sector, appear underfunded, but may actually be adequately funded when off-budget donor support is added to the budgetary allocation.

But he noted that upward trend in off-budget support as a major source of financing the delivery of public goods and services is not without problems. In particular, he said this development means that the Government (including Parliament) does not have decision making responsibility over an increasing amount of resources available to the public. Therefore, the Government cannot properly decide on expenditure priorities, nor properly plan and time the delivery of goods and services in some critical areas.

But Gondwe said Malawi hold the strong view that greater coordination between the Government and the donors will go far in relieving some pressure on the budget itself, and sustaining the impact of donor support.

Currently, African development Bank resume its budgetary support during the 2014/15 financial year but Malawi government remain hopeful that the other two multilateral institutions, World Bank and the European union, will shortly decide to join the African development Bank.

Outlook of 2015/2016 Budget

Since this year’s budget is premised on no budgetary support, Malawi has strategized to generate adequate local resources to finance activities. Consequently, Gondwe said government has developed the tax measures that will concentrate on improving administrative efficiency, encouraging tax compliance, and broadening the tax base in order to generate more domestic resources.

The finance Minister indicated that the design of this year’s budget is characteristically reflective of the diminishing size of the resource envelope available to the Government, as a percentage of GDP (hence, potentially, in real terms), against the pressure of growing needs to provide critical public goods and services. 

He indicated that the draft budget assumes an optimistic macroeconomic outlook for the next financial year. Inflation rate is projected to decline to 16.4 percent, a general decline in interest rates while economy will register a higher real growth rate of about 7.0 percent.

Gondwe being led onto the chamber by Sergeant at
Arms

Hon Gondwe also said the assumed nominal value of GDP for the 2015/16 Financial Year is K3.4 trillion.

Gondwe said, total revenue and grants are projected at K763.5 billion (22.2%of GDP) which is lower share of GDP than the revised figure for 2014/15 of K683.3 billion, which represented 24.2% of GDP. He said this decline in total revenue and grants as a share of GDP is entirely due to the continued decrease in donor grants, which amounted to K132.8 billion in 2014/15, but are projected to decline to K97.1 billion in 2015/16. 

He even mentioned that project grants, which remained buoyant in the past, are projected to decline from K71.5 billionin in 2014/15 to K52.9 billion in 2015/16. Moreover, he said dedicated grants are projected to decline by about K10.6 billion relative to the 2014/15 revised figure of K47.6 billion.

He said tax revenues are projected to rise from K581.0 billion in 2014/15 to K592.4 billion, as the Malawi revenue Authority (MrA) sets out to strengthen the tax administration regime, and as the economy bounces back from subdued growth.

The Minister said the recurrent expenditure allocation, however, it is proposed to increase wages and salaries by an amount that will raise the salaries of the junior grades in the public service. The budget also provides for the recruitment of some 10,500 primary school teachers and 466 secondary school teachers, who are projected to join the civil service during the last quarter of the financial year. These initiatives as well as an annual wage creep scheduled for implementation in December 2016 will raise the wage bill from K198.0 billion in 2014/15 to an estimated K228.7 billion.

Development expenditure, which was revised to K189.2 billion in K2014/15, is projected to rise to K224.0 billion in 2015/16. Some K173.0 billion of this amount will be funded by external resources (development Part I), while K50.0 billion will be funded using domestic resources (development Part II).

For the first time, an amount of K5 billion or 10 percent of the domestically financed development expenditure, is being set aside for rural development in the district councils. Therefore, together with resources for the local development fund (ldf) and the Constituency development fund (Cdf), local authorities will have command over K30 billion this year, for grassroot development projects.

In addition, the draft budget has provided the sum of K6.5 billion for maintenance and rehabilitation of roads within four cities. Of this amount, the cities of Blantyre and Lilongwe have each been allocated the sum of K2.0 billion, while Mzuzu will receive K1.5 billion, and Zomba will receive K1.0 billion.

Direct allocations to key line ministries

The amount of K133.7 billion has been allocated to the Ministry of Agriculture, Irrigation and Water development; K109.8 billion to the Ministry of Education, Science and technology; and K77.4 billion to the Ministry of Health. However, through off-budget donor resources, Ministry of Health will also receive  about K55.6 billion, making a total of K123.0 billion. Similarly, the Ministry of Gender has a total budgetary allocation of K3.2 billion, and will receive off-budget donor funding amounting to K14.4 billion.

The proposed budget has a planned overall deficit of 4.0 percent of GDP, against 4.2 percent in 2014/15. Below the line, planned domestic borrowing is projected at K25.0 billion, or 0.7 percent of GDP. This compares favourably with the corresponding figures for 2014/15 of K36.8 billion, which is 1.5 percent of GDP. Building on the trend in 2014/15 already described, it is planned to reduce the domestic debt stock further from 15.9 percent to 14.5 percent of GDP in 2015/16. Thus, Malawi could be reaching the internationally accepted ratio of 12.5 percent quite soon.

Get the Full Budget Statement Here...https://docs.google.com/file/d/0B_djmeY3fFSHMm9lVFp3aEYxMkk/edit?usp=docslist_api

Or summary...https://docs.google.com/file/d/0B_djmeY3fFSHTGxISi05YWpoOXM/edit?usp=docslist_api