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1.
2.
This is followed by a
3.
economic
activity
should
be
feasible.
stable
4.
In the
percent.
5.
rate in May 2012, at the behest of the IMF, meant that thereafter the
exchange rate would be left to the market forces to determine its
level. It was known and many said so, that a diminishing foreign
exchange supply against a persistent high demand for forex, would
lead to a continued depreciation of the Kwacha until a point of
equilibrium is reached. Therefore in our case, the consequence of a
loss of forex subsequent to donor withdrawal of budget support and
the dwindling of tobacco export earnings, has been a continuous
depreciating exchange rate. Between May 2012 and May 2014, the
rate depreciated by 215 percent from K165 to K520 per US$ and 52
percent between June 2015 and December 2015.
6.
7.
currency stability between October 2014 and June 2015 when the
policy measures that the Reserve Bank of Malawi took and the
currency swap that involved the purchasing of government debt
denominated in Kwacha by the PTA Bank using dollars, briefly
restored order in the foreign exchange market and the exchange rate
steadily appreciated to just about K450 per dollar (middle rate). The
Swap transaction also helped to increase official foreign exchange
reserves to more than US$620 million - the highest ever reached
since independence. However the market forces emerged again to
subject the rate to an almost daily depreciation.
8.
country, our forecast was that, the progressive fall of the rate of
inflation that coincided with the currency stabilisation, would
steadily continue to fall and characteristically reach an acceptable
low level so that thereafter interests rates would also begin to fall
and herald a resumption of economic growth and a stable
macroeconomic environment.
9.
would then have confirmed the IMF forecast that the growth rate in
2015 would surpass that of 2014 which was 6.5 percent.
11. Mr. Speaker, Sir, let me digress a little to address a matter that
continues to trouble some honourable members.
Indeed Mr.
Speaker, Sir, there has been concern that the Government is devoid
of solutions to the current economic challenges that include a
destabilised economy as symbolised particularly by a depreciating
currency as well as the prevalence of food shortages. Despite the
repeated statements that members of the Government including His
Excellency the President himself have time and again elaborately
stated doubts still persist. I know that there will still be some who,
for political reasons, will continue expressing such doubts. This is
expected. I, however, appeal to the public that we can differ on
what should be done, but that does not mean that the Government
does not have plans and policies of what to do. In the debates on
the economy that are coming, His Excellency the President has
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14. The following are our plans that are being implemented:
(i) The Government is cautiously optimistic that the massive
response to its call for smallholder farmers to produce
leguminous crops will be rewarded with good prices of these
crops. It is also expected that the concomitant increase of
foreign exchange that will result from the exportation of these
crops can supplement the dwindling tobacco exports. If this
were to be the case as it should be, our balance of payments
position should improve and the exchange rate that is now
continuously depreciating could be stabilised. In the medium
term we expect that the possible exploitation and exportation
of our mineral resources can increase our exports even more.
(ii)
welcome them. I must add however that over and above what
the Minister said, the Treasury has empowered ADMARC to
procure another large consignment of 50,000 metric tons of
maize from Tanzania. As we see it, we have and will have
enough maize in stock that will be more than enough to satisfy
ADMARC markets in the coming days. Over and above what we
ourselves are doing, the resources that have been so
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land,
the
Greenbelt
irrigation
infrastructure
These
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15. And now to the main subject of the mid-term review which is
amply described in the document that will be circulated to members
shortly. There, Honourable Members will find that in annex I on
budgetary performance, total revenue and grants that were targeted
at K386.1 billion at the end of the first half of the 2015/16 financial
year were under-collected by K50.8 billion. Domestic revenues that
were targeted at K312.4 billion fell short of this amount by K12.7
billion down to K299.7 billion. Although a number of taxes
performed well, the VAT underperformed considerably by an
amount of K5.6 billion. In parallel, grants performed even worse
where the target of K75.3 billion was under performed by K36.5
billion, less than half this targeted amount.
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16. I would like to underscore here Mr. Speaker, Sir, that in our
view, although the bilateral donors only formally withdrew from
budgetary support (programme grants), in fact the disbursement of
other types of grants (dedicated and project grants) is progressively
diminishing also. In parallel, donors are increasing their off budget
support massively. There is therefore need to strengthen our effort
at raising domestic revenues and to down play all donor grants in
general and only expect to focus more on development loans from
donors as a reliable mode of donor aid delivery.
18. Honourable Members should lead the effort to attain selfsufficiency by deflecting public attitudes that regard foreign aid as a
permanent feature of our budget. We must progressively increase
efforts to maximise the domestic coverage of recurrent budget. As
an independent country this must be our goal. In fact such a policy is
long overdue.
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21. On the basis that the house will agree to embark on the policy
of fiscal consolidation, in view of dwindling available resources; it is
suggested that the 2015/16 approved budget be revised downwards
as provided for in annex 2 where it will be seen that it is being
proposed to reduce the budget by K23.7 billion from an approved
figure of K929.7 billion to K906.0 billion. The house will see that we
propose to reduce the Recurrent budget by just over K17.1 billion
and the Development Budget by sum of K5.6 billion.
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22. This will entail that for the coming months, the Treasury will
withhold resources that are intended for filling vacancies. During the
coming discussions with ministries; in consultation with the Public
Service Reform administration as well as the Department of Human
Resource and Management, proposals for reducing the size of the
public service will be discussed with a view to reducing the so called
bloated Civil Service.
23. In order to reduce the amount of ORT, the Cabinet has decided
that the Treasury and the OPC should review the various perks
including travel, vehicle and fuel entitlements that could be scaled
down. Therefore, the funding of ORT to ministries, will not be
against the original approved budgetary allocations but against the
revised budgetary allocations which the house will have approved.
Table 3 presents vote by vote revisions where applicable.
25. I would like to emphasise Mr. Speaker, Sir, that this is not a
Zero Aid budget nor was the original of 2015/16 budget as has been
popularly termed. We will expect a sizable amount of dedicated and
project grants as can be seen in Annexes I and II.
26. For the coming year, it is expected that a more inclusive tax
system could emerge that could increase tax revenues but at the
same time it is intended to subject the fiscal system to yet another
adjustment of public expenditure. Such a policy must be pursued in
parallel with public finance management reforms that are being
pursued now.
27. Mr. Speaker, Sir, the house will wish me to report on these
measures. The first is to assure the house that some major changes
have been made as regards the needed reconciliation of cashbook
transactions, and their mirror images the bank statements. Lack of
this necessary task is one of the major financial management laxity
that made cashgate possible. I am happy to report that for the past
5 months all ministries have been submitting their reports of their
monthly reconciliations to the Accountant General who sorts out
unreconciled items.
IFMIS has been identified and ordered to replace Epicor which is felt
to be inadequate for proper expenditure controls. It is expected that
this new system can commence to operate within the next 3 years.
31. All in all, the performance of the budget this year has been
better than before except for the projected expenditure on FISP. As
the house is aware the bulk of expenditure on FISP relates to the
imports of fertilizers and in view of the deep depreciation of the
currency, the cost of procuring fertilizers has escalated. However,
this year, instead of shouldering all the escalated costs, the suppliers
of fertilizers have had to shoulder some of the
33. The total increase in cost of FISP including seeds is K22.6 billion.
Table II shows that without these escalated costs, the domestic
borrowing would have amounted to zero but in view of the escalated
costs of fertilizers and the seed subsidy under FISP, total borrowing is
estimated at just under K23 billion which is below the targeted
domestic borrowing as at the end of the financial year on 30 th June,
2016. The IMF target under the ECF programme is K25 billion. In
view of the recurring escalating of FISP, the house will wish to see a
redesign of FISP and its management next year.
34. Mr. Speaker, Sir, lastly, I would like to request for a thorough
review of the budgetary outturn and views on how we should
approach the fiscal problems that have been posed in light of the
changed financial circumstances.
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34. I thank you Mr. Speaker, Sir, for the houses attention to this
matter and I beg to move that the house approve the revised
2015/16 budget as presented in detail in Annexes II and III.
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