Country’s GDP projected at 3.6%, grants projected at 4.55 Trillion

Finance and Economic Affairs Minister, Simplex Chithyola Banda has revealed that 2024/25 National Budget is estimated at K5.98 trillion against total revenues of K4.55 trillion that represents a deficit of K.1.43 trillion.

Banda was speaking on Friday 23 February 2024 at parliament as he was taking center stage unveiling the proposed 2024/25 National Budget, amid high hopes from Malawians seeking relief in the challenging economic climate.

He said the country’s Real GDP is projected at 3.6 percent, total revenue including grants which is projected at 4.55 Trillion Malawi kwacha.

Banda said of the total expenditure, K4.21 trillion will be allocated to recurrent expenditure while K1.77 trillion will be development expenditure.

“The allocation to development expenditure represents 30 percent of gross domestic product (GDP), the largest allocation in the past five years. Government intends to finance the deficit by borrowing K1.28 trillion from the domestic market and K150 billion from the foreign market,” he said.

Banda added that government will maintain the surrender requirement in the next year to mitigate pressure on the country’s forex reserves.

“The surrender requirement compels exporters to sell 30 percent of their forex earnings to the government through the Reserve bank of Malawi. This is against the recommendations by exporters and the private sector to lift the requirement and give them more control over their resources,” he said.

He therefore, underscored the 10 percent corporate income tax on profits above K10 billion to all businesses that make such profits to ensure equal and fair treatment of super normal profits and reduced Withholding tax for mobile money agents from 20 percent to 1 percent.

Banda said this is being done to align with the prevailing withholding tax ratefor banks and insurance agents, which is at one percent.

“In addition, most of the mobile money agents do not make enough money to pay personal Income tax as their income falls below the minimum threshold of paying personal income tax,” he said.

The Mzuzu Youth Centre project has been allocated of K2.5 billion in the National Budget, an amount Mzuzu Youth Association (MYA) has described as little looking at the magnitude of the project.

Reacting to the allocation, the association’s projects coordinator Frank Chirambo said the whole project is estimated at K19.7 billion and allocating it only K2.5 billion does not make sense because it will take a long time years to be completed.

“We are talking of a project worth K19.7 billion and allocating K2.5 billion will not make an impact towards its timely completion,” he said.

Chirambo said they will engage responsible government departments to have the allocation in the mid year national budget increased so that the work should finish in time.

In his remarks, youth human rights activist Mervin Xumayo said at the pace the work is being done, the project could take over 20 years to be completed.

The delay to complete the facility is affecting youths in Mzuzu City and surrounding areas in terms of modern sports facilities.

This marks the inaugural comprehensive fiscal plan, following the presentation of a Mid-Year Budget Review Statement on November 17, 2023, succeeding minister’s predecessor Sosten Gwengwe.

In the lead-up to the budget announcement, stakeholders provided their input during pre-budget consultations, expressing expectations for the financial plan to incorporate their feedback and align with President Lazarus Chakwera’s State of the Nation Address (Sona) delivered on February 9 this year.

The Sona garnered praise for its alignment with Malawi 2063, the country’s long-term development strategy aimed at fostering self-reliance, middle-income status, and inclusive wealth, with a focus on agriculture, tourism, and mining. Minister Chithyola Banda has engaged in extensive consultations throughout the budget formulation process, culminating in a final round with Parliament’s Budget and Finance Committee and civil society organizations just six days ago. In a recent interview, William Chadza, Executive Director of the Mwapata Institute, emphasized the anticipation for a significant reallocation of resources towards productive sectors like agriculture.