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The 2006/07 budget is generally what businesses, donors and civil society expected to see as it addresses pertinent issues such as the food shortage crisis, overtaxation and poor infrastructure, various groups said on Friday.
Finance Minister Goodall Gondwe’s financial package of K138.7 billion has taken care of the stomach by allocating the lion’s share to the ministries of Agriculture, Food Security and Irrigation and Water Development.
A second priority in the budget is the restructuring of some taxes with a view to making it easier for corporations, enterprises and foreign investors to do business in the country.
To put food on the table, the budget will pump K16.81 billion to the Ministry of Agriculture and Food Security and K2.5 billion to its complement, the Ministry of Water Development.
This allocation is 12.2 percent of total expenditure and topples Ministry of Education, traditionally the melting pot for public finances.
A total of K8.77 billion is for development expenditure by the two food-related ministries.
Gondwe said the funds will be applied in buying subsidised fertilizer for this year’s farming season and digging new dams and refurbishing existing ones for harvesting water to be used for irrigation.
“This huge increase marks a start in government plans of establishing food self-sufficiency in the country,” he said.
To address concerns from businesses, the budget has cut taxes for company executives from 35 to 30 percent, increased by 20 percent the tax-free income for salaried workers, abolished Minimum Turnover Tax and reduced capital gains tax on assets acquired before 1998 by three percent from 18 percent.
The budget has also proposed the introduction of Rollover Relief, whereby a business will not have to pay tax on the capital gain from selling an asset, provided that the funds received are reinvested in assets of greater cost and of similar type.
While consensus on the income tax is that it should have been lessened further, the Society of Accountants in Malawi (Socam) and the World Bank said Friday the new measures are reasonable, given the severe fiscal pressures Malawi is going through and the need for a balancing act.
“Most of our proposals have been implemented and this shows that the Finance Minister is listening,” said Anderson Kulugomba, vice president of Socam and Head of Finance and Treasury at Nedbank (Malawi).
World Bank Country Economist Khwima Nthara said the budget has been getting better every year and that this year’s reflects a balancing act between private sector growth and support to areas that support the lifeline of the very poor.
“It’s a sensible budget,” said Nthara, an economist who specializes in development issues.
“The dilemma for government has been how to reduce its domestic debt and deal with outstanding and emerging social challenges. In this budget, government has shown that it is able to balance priorities,” he said.
Mabvuto Bamusi, Acting National Coordinator for the Malawi Economic Justice Network (MEJN) described the budget as a “surprise” package.
“We must commend government for prioritising food security,” he said.
“There is also a slight increase in Education and Health allocation, although we would have wanted more here,” Bamusi added.
Jason Agar of the National Action Group (NAG) secretariat—a tripartite forum for businesses, donors and government agency—applauded the Finance Minister for sending a bold signal that government is serious about restoring order in the fiscus.
“This budget reflects greater clarity on government prioritisation. Addressing infrastructural issues such as roads and utilities are critical to private sector,” he said.
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