The Democratic Progressive Party (DPP) says Malawians should brace for tougher times ahead as the government is failing to generate enough forex reserves and the Kwacha is depreciating against major currencies.
DPP spokesperson on Finance Joseph Mwanamvekha said this in Parliament yesterday in his response to the Mid-term Budget Review Statement.
The former Finance Minister said the 2020/2021 National Budget remains consumptive as opposed to development-oriented, unfriendly to the business sector, unrealistic, overburdening in debts, total loss to Malawians, and has nothing to offer to the ordinary man.
According to Mwanamvekha, the budget is unrealistic because foreign reserves have been depleted from US$846.6 million in December 2019 to US$ 574.3 million in December 2020.
“This means, Madam Speaker, that this MCP government is failing to generate enough forex reserves. Malawians should brace for tougher times ahead as they will scramble for the little foreign exchange reserves. If they are lucky to get these reserves, they will get them at a much higher price than it was under the DPP government,” said Mwanamvekha.
He added that this will be exacerbated by the widening of the trade deficit where Malawi is exporting less than what it is importing.
“This therefore, means, as alluded to above will lead to the continued depreciation of the Malawi Kwacha against the currencies of the country’s main trading partners including the US dollar, Euro, Chinese Yuan and South African rand. As the Malawi Kwacha is depreciating the inflation will also be increasing as there is a positive correlation between the exchange rate and inflation,” he said.
He also claimed that the budget is off-track since it has missed both the revenue and expenditure targets. He noted that instead of collecting domestic revenue of K600 Billion during the period under review, government only collected K564 Billion representing a shortfall of K36 Billion.
While on the expenditure side, instead of spending K975 Billion it spent K998.5 Billion, representing an increase of almost K24 Billion and resulting in net borrowing of approximately K30 Billion as at end of December 2020.
“Furthermore, instead of borrowing MK266.3 Billion at end of first half, this government borrowed MK350.9 Billion of which MK304 Billion was borrowed locally, thereby overcrowding the private sector,” he said.
In his presentation on Friday, Minister of Finance Felix Mlusu said projected total net expenditure for the second half of the financial year will hover around K 1.336 Trillion of which K888.1 Billion will be recurrent expenditure and K447.4 Billion will be development, out of which K395.7 Billion will be foreign financed and K51.6 Billion will be locally financed.
Mwanamvekha expressed concern that the country will only contribute 11 percent to its own development budget.
“Madam Speaker, this is worrying because it means without donor support, Malawi will never develop. This level of donor dependency is not inspiring to say the least,” he said.