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Malawi Budget pegged at MK635.6bn

Finance Minister Goodall Gondwe presented the budget statement in parliament on Tuesday Finance Minister Goodall Gondwe presented the budget statement in parliament on Tuesday
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The Minister of Finance Goodall Gondwe on Tuesday presented a MK635.6 billion worth 2014-2015 zero aid budget in Parliament.

The figure is up by 5.3 percent compared to a budgeted amount of MK603.4 billion in the 2013/14 financial year.

The government is banking on tax revenues to support the national budget, since the donors are still withholding 40 percent of the budgetary support to the country in the wake of massive theft of government money last year, in a scandal dubbed cashgate.

Tax revenues are estimated to increase to K470.1 billion from K388.4 billion that was registered in the 2013/14 financial year.

In this budget, domestic revenues are estimated at K525.3bn compared with a final revised estimate of K441.6bn in the 2013/14.

Grants for the 14/15 financial year are projected at K110.3bn which is less than half of the amount of MK240.4bn that was budgeted.

Tax revenues at MK470.1 billion have been estimated to grow by 21.1 percent over last financial year’s, while non-tax revenues at MK55.2 billion have been estimated to grow by only 3.7 percent.

"These growth rates are conservative when compared with growth rates of more than 35 percent in domestic revenues for the previous two years,” said Gondwe adding

"Government will continue with efforts to improve revenue admin and collection and it is envisaged that actual collection will be far higher.

Gondwe revealed that the European Union, World Bank and African Development Bank have indicated that they could provide budget support amounting to over K43.0 billion.

But the minister was quick to mention that the pledges are conditional on demonstrated progress in the implementation of the agreed public finance management reforms.

The government has also reduced its expected amount of dedicated grants to MK38.5 billion, while project grants, that fund development projects, have remained at a high figure of MK71.8 billion.

Key allocations in the 2014/2015 Budget

The finance minister reported that this year, the allocation of resources to votes, is based on the need to attain a number of objectives that the government believes the country wishes to achieve.

“The first is the desire that as a country, we should get at the bottom of what really happened as regards the ‘cashgate’ scam,” said Gondwe.

“Therefore, law enforcement votes have been granted a more than usual expenditure increase that averages at more than 80 percent.”

The Anti-Corruption Bureau vote has a 167 percent increment,  which is the highest of all votes. The Director of Public Prosecutions, the Judiciary, the Police and others have also had large increments for the same reason.

Agriculture, Irrigation and Water Developmentgets lions share

The Ministry of Agriculture, Irrigation and Water Development has the largest share in the budget after being allocated MK142 billion.

Of this amount, Farm Input Subsidy Program is estimated at MK50.8 billion targeting 1.5 million beneficiaries,MK2 billion for promotion of legume production and MK5billion out of the K10 billion that is required for the restocking the strategic grain reserves.

The  Development budget is estimated at MK74.1 billion. The projects earmarked for these resources are the Agriculture Sector Wide Support project, Livestock Development Program, Agriculture Extension and Advisory Services, Irrigation, Rural Livelihood and Agriculture Development (IRLAD), Farm Income Diversification Program, Shire River Basin Management project, National Water Development Program and technical support for the Green BeltInitiative Program.

Education Sector

The ministry of Education gets second highest vote, after being allocated a total of MK127.9 billion, which is 17.2 percent of the budget. The education sector includes resources allocated to Ministry of Education, Science and Technology, Public Universities, District Councils and allocation to the Local Development Fundfor construction of primary schools and teachers’ houses.

Of this amount a total of MK14.3 billion has been allocated to development projects. MK2.4 billion has been allocated for infrastructure projects in the Public Universities, namely the University of Malawi, the Malawi University of Science and Technology, Mzuzu University and Lilongwe University of Agriculture and Natural Resources.

 It is planned that the establishment of Mombera University to be built in Mzimba will start this financial year.

The construction of Primary School blocks and Teachers houses has been allocated MK2.9 billion under Local Government Authorities and the Local Development Fund.

There are budget allocations for rehabilitation of various Primary and Secondary Schools as well as construction of  Teacher Training Colleges in the order of MK1.6 billion asexplained in the relevant budget documents.

Health Sector

The total budget allocation to the health sector is MK65.2billion. This includes allocations to Ministry of Health, DistrictCouncils and National AIDS Commission.

The capital budget allocation is MK14.4 billion. This is meant for the construction of staff houses and health centres under Umoyo project, the construction of new hospitals in Phalombe, Nkhata Bay andDowa Districts and other community hospitals. Resources for rehabilitation of central hospitals, and other district hospitals as well as health centres have also been provided.

The other projects include Nutrition Improvement and HIV/AIDS.62.The Ministry of Health attracts a lot of off budget support from donors. For example, the bulk of our drug requirements is now supplied directly by the DfID and other donors. Expenditure on HIV/AIDS, Tuberculosis and Malaria is almost entirely covered by the Global Fund

Roads, Public Works and Transport Sector

The sector has been allocated MK31 billion. Of this amount,  MK10.4 billion, being road levy collections and will go towards maintenance of roads. A total of MK1.7 billion will go towards various development projects whereas MK17 billion is expected to go towards construction of various road projects across the country.

This amount will also fund a number of road design studies. Among notable road projects are the completion of Chipembere Highway onwards through Limbe, which will be funded and constructed by the Japanese and the construction of the double carriage in Lilongwe, from the Mchinji roundabout to Kanengo that the Chinese will fund andconstruct.

It is also planned to launch design studies for Nathenje/KIA by pass road and the double carriage way of the Mzuzu Airport road. It is also intended to begin the construction of the new high court in Lilongwe.

The construction of fuel reserve tanks at Mzuzu, Lilongwe and Blantyre is at an advanced stage, said the finance Minister  adding the project is being funded by the government of India which has also funded some very vital Green Belt Initiative installations.

Natural Resources, Energy and Mining Sector

The natural resources, energy and mining sector has been allocated MK26 billion. These resources will cater for the construction of additional hydropower plants to supplement the current power generation, support to the mining and governance project and rural electrification program. In addition, there are resources for waste management and various conservation initiatives.

Resources for atomic energy regulation and ISO certification have been provided to support government plans to construct a cancer centre.

Decentralization

The  finance minister said the government’s commitment towards decentralization continues, to the effect that a total of K28.6 billion has been devolved. He said these resources will be utilised in Councils by various sectors that have devolved their functions.

The major proportion of these resources will be channeled to the Education, Health and Agriculture sectors. Resources for the Constituency Development Fund and operational resources for the Councillors have also been included.

Malawi Development Bank

In the financial sector it is planned to establish the Malawi Development Bank that will start with a government majority shareholding with a sizeable private sector shareholding. This structure could be changed so that the majority ownership is reversed and the role of the government in the institution is diminished considerably.

2014/15 Proposed Tax Measures

The government has declined to withholding 3% tax that is applicable to the smallholder farming community. He also emphasized that tax incentives are available to both foreign and local investors with no discrimination.

Income Tax

Government has reduced corporate tax rate from 33 percent to 30 percent in the Telecommunication sector for mobile phone operators. However Malawi Revenue Authority (MRA) and Malawi Communication Regulatory Authority (MACRA) are expected to continue working together in the regulation of this sector.

Value Added Tax (VAT)

In order to support local industries operating in these strategic sectors and also to promote import substitution, under the industrial rebate scheme, raw materials used in the production of fertilizer and medicine will now be relieved from VAT under the Third Schedule of the VAT Act.

Customs and Excise

Ggovernment agrees to remove the import duty, import excise and VAT on minibuses that are zeroto five years.

Customs Procedure Codes

Government has removed Customs Procedure Code 487 allowing duty free importation of goods by banks covering; ATM machines, point of sale devices and mobile banking vans.

Trade Agreements and International Taxation

The minister said Malawi remains committed to the tariff offers made under the SADC Trade Protocol in order to facilitate regional integration within the SADC region. In this regard, Malawi now undertakes to further reduce the tariffs that are applicable to South Africa in line with the SADC Trade Protocol.

The finance minister announced that the Customs and Excise tax measures that he announced will be effective from Tuesday whereas the VAT and Income tax measures will be effective 1st October 2014 once the relevant bills are passed by this house.

Meanwhile, the House is adjourned to Wednesday, September 10, 2014 at 2pm as the Parliamentary Committees will scrutinize the budget for five days as agreed.

Malawi has been running the provisional budget of K210 billion that this house passed in June 2014, and Gondwe said it has begun to bring normality in the functioning of the ministry.

Last modified on Wednesday, 03 September 2014 07:31

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