Budget allows lowest-paid to escape income tax.

Author:Mhone, Chatonda

The Malawi economy grew by 10.8% in fiscal 1993/94, mainly as a result of exceptionally high growth rates in the agricultural sector, Finance Minister Louis Chimanga proclaimed in his 25 March budget statement.

But the prospects for 1994/95 are very much less favourable.

Presenting his budget statement to Parliament, Chimanga added that other sectors of the economy contracted, especially the manufacturing sector, which depends on imported inputs and is adversely affected by the lack of foreign exchange following the suspension of aid by multilateral and bilateral donor agencies.

Total supply of goods to the domestic market increased by 23% over 1992/93, while consumption expenditure increased by 33% during the same period.

Inflation stood at an annual average of 22.8% in 1993/94, compared to 23.3% in 1992/93.

Economists contend that the rate could have been lower if it were not for wage settlements. Malawi has been hit by a spate of industrial unrest following the introduction of pluralistic politics, with people demanding higher salaries. According to UN figures, 80% of Malawians have below the poverty line.

Trade deficit

On the external sector, the deficit on the visible trade account improved slightly, from MK786.1m in 1992/93 to MK539m (now $77.8m) in 1993/94, owing mainly to low import levels despite a marginal decline in exports. Total imports, excluding maize, amounted to MK1.94bn in 1993/94, compared to MK2.22bn in 1992/93. Total exports amounted to Mk1.4bn in 1993/94, compared MK1.43bn in 1992/93, as a result of a shortfall in smallholder agricultural production arising from a severe drought which has hit the country.

Malawi has a very narrow and underdeveloped export base. Tobacco remains the main export. The value of tobacco exports declined by 8.9%, from MK1.03bn in 1992/93 to MK938m in 1993/94. Tea exports increased from MK106.7m in 1992/93 to MK156.7m in 1993/94, owing largely to a 54.2% increase in export unit value, despite a decrease of 4.9% in export volume. There is a serious need to diversify the export base as one means of reducing the dependence on external balance-of-payments support. There is a need to reorient the manufacturing sector, which is currently inward-looking, towards manufacture for export,' Chimanga told the House.


The budget statement, the most lukewarm in recent years, basically dwelt on the medium-term development programme, which is aimed at the alleviation of poverty, ignorance and disease...

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