Sunday, May 26, 2013









6.1. Global Economic Outlook

6.2. Outlook for Sub-Saharan Africa Region

6.3. The Malawi Economy


7.1. Transitional and Recovery Based Budget

7.2. Fiscal Policy Anchor: No Net Domestic Financing

7.3. Monetary Policy and Financial Sector Development


8.1. Resource Envelope

8.2. Total Expenditure and Net Lending

8.3. Overall Balance and Financing



10.1. Agriculture and Food Security

10.2. Public Works Programme

10.3. School Feeding Program

10.4. Public Financial and Economic Management Reforms

10.5. Education, Science and Technology

10.6. Public Health, Sanitation, and HIV/AIDS Management

10.7. Transport and Public Works


11.1 Preamble

11.2. Tax and Non-Tax Policy

11.3. Non Tax Measures

11.4. Tax Measures

11.5. Customs and Excise Tax Measures

11.6. Income Tax Measures

11.7. Excise Tax Measures

2013/14 Budget Statement


11.8. Value Added Tax Measures

11.9. Administrative Measures

11.10.International and Regional Trade Agreements

2013/14 Budget Statement


Mr. Speaker, Sir, I beg to move that the Estimates on Recurrent and Development Accounts for the 2013/14 Budget be referred to the Committee of the Whole House, be considered Vote by Vote, and that thereafter, be adopted.


Mr. Speaker, Sir, I am honored to stand here and deliver to this August House the second Budget Statement of the People's Party (PP) Administration led by Her Excellency, Dr. Joyce Banda.

Before I proceed with my statement, allow me to once again express my most profound gratitude to the President for
entrusting me with the responsibility of leading her economic team in these trying times. I also wish to offer my deepest appreciation of her leadership and guidance.

It is because of Her Excellency's guidance that we all can see the light at the end of the tunnel and have hope for an improved economy.

Mr. Speaker, Sir, as we have always done, I led the Ministry of Finance in consultations with a wide range of
stakeholders across the country in April and May this year, to get an understanding of what Malawians want to see in this budget.

This budget that I am presenting has benefited greatly from these consultations. Of course, it was not possible to take on board all the good ideas due to limitations of resources. I would, therefore, like to thank most sincerely all those who came forward with ideas on how to move the economy forward and make the budget reflective of the aspirations of our people.

Mr. Speaker, Sir, the honorable House is well aware of the economic challenges that we faced in this country at the time I presented last year's statement. We introduced and have been implementing a series of tough economic reform measures that were designed to restore macro-economic balance and a market based economy that would help provide a solid foundation for sustainable economic growth.

Mr. Speaker, Sir, you will recall that in trying to correct a severe external imbalance, we undertook a number of measures in the foreign exchange market, including an initial devaluation and subsequent floatation of the Kwacha, removal of restrictions on foreign exchange transactions by banks and bureaus, relaxation of surrender requirements on export proceeds, and removal of pre-screening requirements for foreign payments in excess of USD 50,000.

Just recently, further measures were also announced by the Reserve Bank of Malawi in order to remove restrictions with respect to current account transactions.

You will agree with me, Mr. Speaker, Sir, that at the beginning, the reforms that we instituted were not universally accepted.

Skeptics pointed to an exchange rate that had overshot and inflation that had surged as reasons for abandoning our tough reforms. However, convinced that the path we proposed was necessary under the circumstances we faced, we marched on, sometimes amidst some resistance and criticism.

I am pleased to inform the august House that there are now signs that the great patience and resilience of the people
of Malawi, for which we are profoundly grateful, is beginning to be rewarded. There is evidence that the economy is now starting to recover.

Mr. Speaker, Sir, in January when I presented the mid-term budget review, we celebrated the availability of fuel.

People were no longer sleeping in queues at filling stations or chasing fuel tankers, often empty ones. I also spoke of the availability of foreign exchange.

Thanks to measures that this House approved, we have now been able as a country to clear foreign exchange arrears and re-establish lines of credit for most of our industries.

Mr. Speaker, Sir, the availability of fuel and foreign exchange enabled our companies to resuscitate production.

The latest business survey undertaken shows that capacity utilization, which had gone down to an average of 30 percent, had increased to an average of more than 60 percent and a significant number of companies had started to expand.

I also invite the House to join me in welcoming the stabilization of the exchange rate, which has even shown some
signs of appreciation. This has led to the much awaited reduction in the price of fuel. It is the hope of all of us in this House that we will soon see the benefits of competition in bringing down prices in other markets.

As a result of our policies, along with good weather in some parts of the country which has ensured adequate
availability of maize, we have noticed a decline in inflation since February. It is only fair that all of us play our part in ensuring that the economy moves forward.

Mr. Speaker, Sir, the 2012/13 budget was implemented within a framework designed to deal with the challenges faced, and in so doing, we were able to restore the confidence of our international partners, including the IMF, who noticed our determination to deal with our own problems.

The successful resumption of the programme with the IMF, in turn, allowed us to unlock budget support from the Common Approach to Budget Support development partners (the European Union, the United Kingdom, the World Bank, Norway, Germany, African Development Bank, and Irish Aid).

The unlocking of budget support and increased support from all our development partners was an essential component
of the economic recovery process. The first and second reviews of the programme were successfully completed. As a
consequence, SDR39.1 million an equivalent of US$58.7 million has been disbursed under the programme.

The third review will be conducted in June 2013 when the IMF mission returns to Malawi. We are confident that this review will also be successful and we will remain on track.

Mr. Speaker Sir, the 2013/14 financial year budget seeks to build on the successes of the 2012/13 financial year budget and consolidate the gains from the economic reforms undertaken. We intend to continue with a tight fiscal and monetary policy stance to ensure that government operations do not contribute to inflation and crowding out of the private sector.

In short, Mr. Speaker, Sir, we should continue to strive to live within our means.

Within the context of a tight budget, government remains committed to strict expenditure controls and substantive
reforms in order to strengthen and promote a culture of enhanced transparency and accountability in the management
and reporting of public finances to avoid over-expenditure.

I can assure the honorable Members of this House that we remain committed to using public resources efficiently and
effectively, ensuring value for money and focusing our efforts on achieving sustainable delivery of services.


Mr. Speaker, Sir, owing to the myriad of economic challenges our country was facing at the beginning of 2012,
growth in economic activity was subdued.

Gross Domestic Product as a measure of economic activity only grew by 1.8 percent in 2012, a slowdown from 3.8 percent registered in 2011.

This was mainly on account of substantial reductions in growth of agriculture, manufacturing, wholesale and retail
trade. This dismal performance in GDP growth meant that companies were downsizing or closing, unemployment was
rising and income per person was falling.

However, Mr. Speaker, Sir, our business survey towards the end of 2012 indicated that the initial measures undertaken were beginning to bear fruit. Although some challenges still persist, overall performance of companies has improved and confidence in the economy is growing.

These developments in the real sector, coupled with improvements in foreign exchange and fuel availability, are expected to anchor growth in economic activity in 2013 and beyond.

Although, the country's inflation peaked at a high of 37.9 percent in February 2013, the good news, Mr. Speaker, Sir, is that inflation has started declining. Already by April 2013, headline inflation had started responding to our measures and eased to 35.8 percent, due to a tight fiscal and monetary stance implemented by the Government and new food harvests which had began to reach the markets.

Mr. Speaker, Sir, concerning the external sector, the alignment of the exchange rate to its market value and
liberalization of the foreign exchange market are key to a sustainable current account. Our estimates indicate that, in nominal dollar terms, imports decreased by 2.2 percent in 2012, while exports decreased by 3.4 percent in the same year.

However, in 2013 exports are expected to grow by 0.7 percent, while imports are expected to decrease by 5percent. With this, we anticipate to achieve our objective of a stable exchange rate while maintaining current account sustainability.

It is our sincere hope that the US$/Malawi Kwacha Exchange Rate can stabilize at a reasonable rate but of course the actual situation will be determined by market conditions.


Mr. Speaker, Sir, in spite of the many challenges facing the Government, the fiscal performance for the 2012/13 financial year is on track.

Overall, domestic revenues are expected to amount to K283.5 billion, surpassing the Mid-Year revised target of 278.9 billion by K4.6 billion, largely on account of tax revenues, which are projected to amount to K253.6 billion against a Mid-Year revised target of K243.8 billion.

Grants underperformed marginally from the revised amount at mid-term. The revised target at mid-term is K179 billion, but we now expect that K175 billion would have been disbursed by the end of the financial year, due to challenges of absorption in our Ministries, which are now being addressed as
a matter of urgency.

Mr. Speaker, Sir, Government is expected to spend K479.1 billion by the end of the 2012/13 Financial Year,
compared to K475.8 billion revised at Mid-Year.

The upward adjustment is due to increases in foreign financed development expenditure, which has increased by K6.4 billion although its effect was moderated by a K2.7 billion decrease in domestically financed development expenditure.

On recurrent expenditures,although the increases in wages and salaries led to a K4.2 billion increase in the wage bill, corresponding cuts in 2013/14 Budget Statement purchases of goods and services and subsidies and transfers
eased the pressure and contained recurrent expenditures within the target by K0.5 billion.

On the basis of the developments above, the overall balance for the 2012/13 financial year is expected to be K18.2
billion which will be wholly financed by foreign borrowing. In addition, government expects to repay domestic debt
amounting to K18.6 billion, thereby meeting the programme target for net domestic borrowing for the period ending June 2013.


Mr. Speaker, Sir, the house is aware Government has been implementing reforms under the Economic Recovery Plan
(ERP) and in line with the Malawi Growth and Development Strategy (MGDS) II.

Under the ERP, five sectors were identified, namely:Agriculture; Energy; Tourism; Transport Infrastructure
Development and Information Communication Technology (ICT); and Mining as critical areas to move the ERP forward.

Mr. Speaker, Sir, my colleagues responsible for these sectors will no doubt later be making statements on the successes so far achieved, but significant progress has been made.

These will be further implemented through the 2013/14 budget.


Allow me at this juncture,Mr Speaker, Sir, to state the assumptions made in projecting the 2013/14 Fiscal Year

Briefly, I will give projections of the global economic outlook, then the regional economic outlook, and lastly the
national prospects.

6.1. Global Economic Outlook

29. As you might be aware, Mr. Speaker, Sir, the National Budget is implemented within the context of a globalized economy.

According to the April 2013 World Economic Outlook (WEO) by the International Monetary Fund (IMF), global
economic prospects have improved, but the road to recovery in the advanced economies remains bumpy and uncertain.

Mr. Speaker, Sir, world output growth is forecast to reach 3.3 percent in 2013 and 4.0 percent in 2014, anchored by growth in emerging and developing economies.

In advanced economies, activity is expected to gradually accelerate, starting in the second half of 2013. This pickup follows the slowdown in the first half of 2012, which was manifested in industrial production and global trade.

Private demand appears increasingly robust in the United States, but still very sluggish in the Eurozone area. Growth is forecast at 0.3 percent in 2013 and in 2014 growth in Europe is projected at 1.5 percent.

6.2. Outlook for Sub-Saharan Africa Region

Mr. Speaker, Sir, Sub Saharan Africa (SSA) is expected to continue growing at a strong pace during 2013/14 period, with both resource-rich and lower-income economies benefiting from robust domestic demand. Growth in 2013 is projected to reach 5.6 percent.

The strong performance is based on ongoing investments in infrastructure and productive capacity, continuing robust consumption, and the activation of new capacity in extractive sectors.

Sub Saharan Africa is projected to grow by 6.1 percent in 2014 driven by the strengthening of activity in South Africa and other middle-income countries predicated on improvements in the external environment. On the other hand,
Mr. Speaker, Sir, some deterioration is expected in the short term in the current account balances of a number of countries, largely on account of the expected decline in the terms of trade, especially among oil exporters.

6.3. The Malawi Economy

Turning to the domestic economy, Mr. Speaker, Sir, growth in 2013 is expected to rebound to 5.0 percent from 1.8 percent in 2012. This growth is mainly being driven by improvements in the Agricultural, Forestry and Fishing sector.

The rebound in agriculture is partly propelled by increases in tobacco production from 79 million Kg in 2012 to 156 million Kg in 2013.

In addition, manufacturing is also expected to increase on account of higher tobacco processing and fewer
production bottlenecks related to fuel and foreign exchange problems.

As indicated earlier, Mr. Speaker, Sir, capacity utilization in most of the sectors has shown great

Mr. Speaker, Sir, considering the foregoing, inflation is expected to slow down to 14.2 percent by December 2013 and to 7.0 percent by December 2014 as the economy continues to recover.

Mr. Speaker, Sir, as usual, we expect to experience the traditional seasonal trends that are a characteristic of the Malawi economy. However, we are very confident that these seasonal trends will be smoothened out on account of the prudent economic management.


7.1. Transitional and Recovery Based Budget

Mr. Speaker, Sir, the key objective of the 2013/14 budget is to restore macro-economic balance and a market-based economy that will consolidate the bold economic reforms that the Government embarked on in 2012.

As we all know, the country will be going to the polls in 2014 to elect a president, members of parliament and

The budget must, therefore, provide for this important event in our democratic process. This expenditure is not a
regular feature in our budget framework. In order to create space for this event, some activities have had to be

Mr. Speaker, Sir, we have, however, prioritized some critical expenditures in areas of Agriculture and Food Security, Health, Education, Transport and Water. Adequate resources, within the limitations of the resource envelope, have been provided to those sectors.

With diligent management of the economy and efficient use of the resources provided, the country should expect quality service delivery.

Mr. Speaker, Sir, in this budget, Government will continue to implement the reforms undertaken in 2012. In this regard, we will continue to adhere to the principle of a market based economy, so as to reduce the burden of subsidies on tax payers. In addition, Government is scaling up implementation of Public Financial and Economic Reforms aimed at achieving meaningful expenditure control and prioritization, strengthening governance systems for public financial management and prevention of and avoiding the build-up of domestic debt and arrears as was the case in the past.

The Budget follows the principles of the Medium Term Expenditure Framework with proposed estimates for the
2013/14 fiscal year as well as projections for 2014/15 and 2015/16 fiscal years. This ensures that Budget allocations are aligned with the country's medium term goals as outlined in the Malawi Growth and Development Strategy II; Economic Recovery Plan; and the Millennium Development Goals.

The Medium Term Expenditure Framework is intended to encourage long term planning and not to cram programmes
and projects in the short term. Short term planning results in thinly spreading of our resources over too many activities with minimal impact on development.

Mr. Speaker, Sir, it is important that we consider critically our implementation capacity in order to ensure that programmes and projects are implemented efficiently and effectively. Over the years, we have seen the dangers of trying to do everything at the same time without due regard to implementation capacity. Programmes have experienced cost overruns and poor quality which could have easily been avoided.

7.2. Fiscal Policy Anchor: No Net Domestic Financing

Mr. Speaker, Sir, in order to remain on track on our programme to reduce inflation and stabilize the exchange rate, government has in the past relied on monetary policy. Beginning from the 2012/13 fiscal year, government planned the fiscal policy, so that it complements its critical role, just as the monetary policy in dealing with inflation and exchange rate.

You will agree with me that in the past, programme targets were missed primarily on account of loose fiscal stance.
In order to sustain and build on the gains achieved so far, the fiscal policy will have to remain very tight in the coming year.

Mr. Speaker, Sir, in this regard, the fiscal anchor for the 2013/14 fiscal year, like that of the current financial year, remains "No Net Domestic Financing" with a planned net domestic debt repayment of K7.2 billion, which is equivalent to 0.5 percent of GDP.

This fiscal stance is intended to reduce the domestic debt stock to allow the private sector space to borrow at reasonable rates for productive investment. The private sector as the engine for growth and development must be allowed to operate in a conducive environment. One such element in this atmosphere is financing at reasonable interest rates.

7.3. Monetary Policy and Financial Sector Development

Mr. Speaker, Sir, the Budget will be supported by a prudent and tight monetary policy stance designed to contain money growth and achieve price stability while allowing for private sector growth. Money is programmed to grow at about the pace of nominal GDP in the near term and further financial deepening in the medium term would allow broad money to grow faster than nominal GDP without fueling inflation.

The monetary authorities will monitor the inflation rates very closely so as to adjust interest rates in line with the levels of inflation.

The monetary policy reforms that the Reserve Bank has been implementing will continue. Foreign exchange will remain
liberalized and the rates being determined by market forces.

The target, Mr. Speaker, Sir, is that we achieve sustainable foreign exchange levels.

In order to protect small depositors and strengthen the stability of the financial system, we will expand the financial safety net by instituting a Deposit Insurance Scheme for the country. To this effect, we have constituted a National Task Force comprising experts from the Ministry of Finance and the RBM with the task of designing and establishing the country's first ever explicit Deposit Insurance Scheme.

The National Task Force, under the leadership of the Ministry of Finance, has
already developed a comprehensive business plan upon which
Government and RBM will provide seed capital to enable the
scheme roll out. We have provided resources for the
capitalization in this year's budget and within the course of the
year, we will be asking this august House to consider and
approve the legal and regulatory framework for the scheme.


8.1. Resource Envelope

Mr. Speaker, Sir, let me now turn to the fiscal projections for the 2013/14 Budget. Total revenues and grants for the 2013/14 FY are expected to amount to K603.4 billion from K460.9 billion in 2012/13 FY. Domestic revenues are projected at K363.1 billion, representing 60.0 percent of total revenue and grants, while K240.3 billion are donor grants, representing 40.0 percent of total revenue and grants.

Of the total domestic revenues, tax revenues are projected at K328.1 billion while the non-tax revenues are estimated at K35.0 billion. Grants, on the other hand are expected to increase by 36 percent from K177. 4billion estimated for 2012/13 FY to K240.3 billion.

8.2. Total Expenditure and Net Lending

Mr. Speaker Sir, total expenditure and net lending for the 2013/14 Fiscal Year are projected at K638.2 billion comprising K463.1 billion recurrent expenditure and K175.0 billion development expenditure.

8.3. Overall Balance and Financing

The overall fiscal deficit for the 2013/14 FY is projected at
K34.8 billion. This deficit will be wholly financed by foreign
borrowing amounting to K42.0 billion. These resources will
further be used to finance domestic debt repayment of K7.2
billion which is equivalent to 0.5 percent of GDP in line with
the fiscal anchor of No Net Domestic Financing. This
repayment of domestic debt will reduce the domestic debt stock
from K170.6 billion at the end of 2012/13 financial year to
K163.4 billion at the end of the 2013/14 financial year.


Mr. Speaker, Sir, as the August House considers the budget for approval I wish to ask that special attention be paid to the following aspects of the budget:

The first is the fact that the development partners are financing the budget to the tune of 41 percent of total
expenditure. While this is good news in that it shows the trust and confidence that development partners have in Her
Excellency Dr. Joyce Banda's leadership and policies, it also raises the issue of long term fiscal sustainability.

Mr. Speaker, Sir, the questions we should be asking ourselves as a Nation are critical for our future. A few of these are: (a) How do we move towards living within our means? (b) How do we grow this economy fast enough to meet our consumption demands and population growth? How do we increase the contribution of domestic revenues to the Budget?

I have no doubt that this House will agree with me that the people of Malawi have no wish to turn into a nation of
subsidies. We need to face the fact that almost every service that the government is providing is heavily subsidized.

Mr.Speaker, Sir, as everyone knows we subsidize Agriculture by almost 75 percent, Education by close to 90 percent, Health by almost 100 percent. Until last year, we were subsidizing fuel and electricity. We still heavily subsidize water.

Mr. Speaker, Sir, subsidies are justified in a number of
cases. But from the Pre-Budget Consultations that I led we
found out that Malawians want their Government to implement
policies that will one day make some subsidies unnecessary
while maintaining targeted subsidies for the poor.

The other element to note is the imbalance between
salaries and wages and goods and services. The proposal is to
spend K131.1 billion in salaries and wages and yet spend only
K64 billion in goods and services. What this means is that we
need to examine how to ensure that sufficient resources are
provided to improve efficiency.

Mr. Speaker, Sir, our Development budget which is K154
billion is 70 percent financed by development partners and is
only about 24 percent of the total expenditure. Much as we
thank the Development Partners and the tax payers in their
respective countries for their generosity, time has come to start
asking ourselves whether this is sustainable.

Mr. Speaker, allow me to echo the call by the President
that we undertake a soul searching exercise as a nation. Could
we be asking too much from our Government to the extent that
we are consuming too much without sufficient investment for
our children?

As we go for elections, I have no doubt in my mind that
during the campaign period we politicians will be promising
the moon to the electorate, such as free secondary school
education, free fuel and electricity, high salaries and wages for
the public service and many more, and indeed where
government is providing subsidized fertilizer somebody will
promise free fertilizer. Mr. Speaker, I am just mentioning this
as food for thought, and this, too, is free.


Mr. Speaker, Sir, I now turn to key allocations in the 2013/14 budget. Due to the constraints in the resource
envelope, the budget has had to prioritize key sector which we believe would make an impact on poverty reduction. These areas, Mr. Speaker, Sir are in line with the Economic Recovery Plan and MGDS II. The major areas are Agriculture and Food Security, Social Support and Protection, Education, Health, Transport, Tourism, Mining and Energy. Some of the areas, Mr. Speaker, Sir, may not feature highly in the budget because
they will be undertaken by the private sector and these include
mining, tourism and energy.

10.1. Agriculture and Food Security

Mr. Speaker, Sir, Agriculture is the main stay of our
economy and will remain a major driver of the economy in the
medium term. Agriculture will also remain the source of
livelihood for most of the population in Malawi and the critical
element in this is food security. In order to achieve this Mr.
Speaker Sir, we need to bring in the private sector. In this
regard, we will work with stakeholders to find ways of making
agriculture more attractive to investment. This is intended to
ensure National food security and export oriented agriculture.
66. Government also intends to resuscitate sub-sectors of
agriculture such as animal husbandry and legumes. Apart
from Maize, tobacco, cotton, tea and other traditional crops
government intends to encourage non-traditional crops such
as legumes. In this budget, therefore, Mr. Speaker, Sir
Government has allocated adequate resources for animal
husbandry, scaling up of legume production, and irrigation.
The budget is proposing an allocation of K1.7 billion for
legumes, K2.0 billion for the second cropping, K1.6 billion for
small stocks, and K2.0 billion for a Cow per Family

Mr. Speaker, Sir, despite the resource challenges, food
security remains a major priority and the Farm Input Subsidy
Programme will continue. A total of K60.1 billion has been
allocated. This fertilizer will be made available to the small
holder farmers at a subsidized price of K500 per 50kg bag for
both basal and top dressing fertilizers. The Ministry of
Agriculture and Food Security has worked out the specific
details on the distribution modalities and schedules, including
participation of the private sector, to ensure that the
distribution is timely and without any irregularities. It is
expected that the fertilizers will have been bought from the
suppliers by September, 2013 and that distribution will start

As you know, Mr. Speaker, we need to replenish our
Strategic Grain Reserves. In this regard, a total of K5.0 billion
has been allocated, of which K3.7 billion is grant from the
Norwegian, Irish Governments, and African Development
Bank. We are in discussion with more Donors to assist us
increase the amount of maize to be procured for our Strategic
Grain Reserves.

10.2. Public Works Programme

Mr. Speaker, Sir, a total combined outlay of K 23.3 billion
will be used to implement programmes aimed at asset building
and infrastructure improvement as well as nutrition
supplementation. Government will implement a K3.4 billion
Social Cash Transfer program under the Ministry of Gender,
Children and Social Welfare with support from KfW and
Ireland. As usual the Public Works Programme will be
implemented under the Local Development Fund (LDF) where
K18.4billion will be spent with support from the World Bank,
African Development Bank (ADB) and KfW. After a successful
implementation of the last Public Works Programme, we are in
discussion with the World Bank to increase the amount so that
we increase the number of beneficiaries and the number of
days each beneficiary is allowed to work. This will mean more
income for the beneficiaries.

10.3. School Feeding Program

Mr. Speaker, Sir, Government will continue to support the
school feeding programme that is being implemented by the
Ministry of Education, Science and Technology (MoEST) with
financial assistance from World Food Programme (WFP) and
other partners. A total of K500 million has been allocated in
the 2013/14 budget. All pupils in the targeted schools receive
a mid-morning serving of corn soya blend (Likuni Phala)
porridge each school day. Mr. Speaker, Sir, there is ample
evidence this programme leads to surges in enrolment,
attendance and academic achievement. The allocation is
double what was allocated last year and thus the number of
pupils will double.

10.4. Public Financial and Economic Management Reforms

Mr. Speaker, Sir, earlier I spoke of the need to take a fresh
look at what we are spending our money on so that we
concentrate on productive investment. To complement this, we
need to achieve high levels of efficiency and economy. We must
achieve high levels of value for money.
72. In this regard, in 2012, we developed a programme to
improve our Public Financial and Economic Management
which covered 10 components including planning, resource
mobilisation, budgeting, accounting, procurement, reporting
and auditing. We have now launched two projects covering
several of these components. In light of the critical importance
of financial reporting and accountability, the first project dealt
with the issues of our financial management information
system and auditing. During the last 12 months there has been
significant progress on the development of our Public Financial
and Economic Management Reform Programme (PFEM).

Mr. Speaker, Sir, over the next 12 months a series of
improvements are being undertaken under a project known as
Financial Reporting and Oversight Improvement Project
(FROIP). These include a re-engineering of our business
process which will be used for upgrading the Integrated
Financial Management Information System, strengthening our
financial operations now that we have been able to roll out our
IFMIS to all central and local government institutions, and
strengthening our auditing systems to respond more effectively
to not only financial but also performance reporting.
Government is grateful for the support we have received from
donors DFID, EU, Germany and to the World Bank for this

Another project supporting elements of planning and aid
coordination has also been signed with support from UNDP
and the UN agencies. In addition, a further project is planned
to undertake the remaining components of the Public Financial
and Economic Management reform programme. These include
improving revenue collection and administration,
procurement, improving medium term fiscal framework, and
improving parastatal financing. We have offers of support from
the African Development Bank, United States Agency for
International Development and Norway for the continuation of
our reform programme.

10.5. Education, Science and Technology

Mr. Speaker, Sir, the education sector has been allocated
K99.19 billion in the 2013/14 budget representing 20 percent
of the total budget. Comparing with the 2012/13 revised
allocation of K80.0 billion the current allocation represents an
increase of 24 percent on last year's approved allocation.

The recommended allocation for Education in Sub-
Saharan Africa is 24 percent of the budget. We have not yet
achieved this but we are almost there. I believe in the next two
years we should be able to achieve if not surpass this target.

Mr. Speaker, Sir, we expect that the quality of education
will continue to improve as we reduce teacher pupil ratios,
especially in the primary schools. In the 2013/14 fiscal year we
expect to employ 10,500 primary and 1975 secondary school
teachers. As Her Excellency the President announced in her
State of the Nation address about 11,000 primary school
teachers will be promoted during the year. The process of
promotions is well advanced.

In order to create efficiency in the system procurement of
teaching and learning materials will be decentralized. This has
been done in order to further improve the availability of
teaching and learning materials in all primary and secondary

Mr. Speaker, Sir, during this current sitting of Parliament
the Ministry of Education, Science and Technology will bring to
the august House a bill for students' loans for those in tertiary
institutions of education. The current system of subsidy is not
sustainable. Beyond being unsustainable, the system denies
many deserving students the much sought after higher

In addition to operating resources allocated for the
Ministry of Education, Science and Technology a total of
K12.4billion has been allocated for development projects.
Currently 1,000 primary school teachers' houses are complete
and it is planned that 2,000 houses will be built in the next
financial year. The plan Mr. Speaker, Sir, is that in ten years
every teacher especially in the rural areas should have a decent
house. Mr. Speaker, Sir, government will continue with the
building of classrooms. It is planned that 1,000 classrooms will
be built in the next financial year. Work on construction of
girls' hostels in 17 Community Day Secondary Schools is under
way and an additional 28 will be started in the coming fiscal
year. Under MASAF/LDF a total of K4.3 billion has been
allocated for continuation of construction of teachers' houses
and school blocks in the next financial year.

10.6. Public Health, Sanitation, and HIV/AIDS Management

Mr. Speaker, Sir, special attention has been paid to the
provision of drugs in the Health facilities of the country. In this
regard, K14billion, equivalent to US$35mmillion will be made
available for drugs for the Health sector. Furthermore, we
expect an additional K7.6billion equivalent to US$19million
equivalent in drugs to be given by Development Partners such
as Global Fund. Mr. Speaker, Sir, in total the drugs to be
available will exceed the US$7.6 per capita recommended by
the World Health Organisation.

The challenge, however, will remain in distribution,
management and control. Government is calling for total
accountability of these drugs from the Health personnel
involved. Mr. Speaker, Sir, government has also decided that
drug procurement be central. This will prevent Health facilities
buying from drugs from vendors at exorbitant prices. The
procurement process will also be improved to avoid drug stock-
outs that we have experienced in the past.
83. Mr. Speaker, Sir, I wish to call upon all the Health
personnel and all those involved in the drug supply chain
management to be honest and diligent in the way they manage
the drugs.

Government has also allowed some Health facilities to
open or introduce fee paying windows to allow those who can
afford and those with Health insurance such as MASM to be
able to use them. Government has also decided that the fees
paid in these facilities will be retained and used by the Centre.
85. Mr. Speaker, Sir, we will continue implementing the
projects that were started last year. This primarily concerns
rehabilitation of facilities such as Zomba Central Hospital,
Zomba Mental Hospital, Nsanje District Hospital, Kamuzu
Central Hospital, In addition Mr Speaker, Sir, Government will
be completing construction of Nkhata-bay District Hospital and
start the construction of Phalombe District Hospital and staff
houses under the Umoyo Project.

10.7. Transport and Public Works

Mr. Speaker, Sir, transport infrastructure will remain one
of the critical elements of our development programme. Our
transport infrastructure, especially the road network, is
relatively well developed compared to other countries in SSA.
However, in recent years maintenance has not been
maintained adequately in recent years. Resources that would
have been used to maintain our road network was used to
subsidize fuel as most of the fuel industries were holding fuel

Mr. Speaker, Sir, with the introduction of the Automatic
Fuel Pricing we have cleared what the Price Stabilization Fund
owed the industry and remittances have started to come in. In
this budget therefore, resources have been allocated for the
maintenance of the road network, including rural feeder roads.
As such a total of K9.1 billion has been allocated for the
grading and maintenance of rural roads. Mr. Speaker, Sir, this
amount of money would cover in excess of 35,000 kilometers.

Mr. Speaker, Sir, on transport infrastructure
development, government will continue with the construction
of Thyolo-Thekerani-Muona-Bangula road, Chikwawa-Nchalo-
Bangula road, Liwonde-Naminga road, Zomba-Jali- Kamwendo
- Phalombe- -Chitakale Road, Jenda-Embangweni-Edingeni-
Euthini Road, Ntcheu-Tsangano-Mwanza road, Lilongwe-Old
Airport- Kasiya-Sathe Road and Mzimba-Mzalagwe road among


11.1 Preamble

Mr. Speaker, Sir, before I outline the revenue policy
measures, I wish to take this opportunity to sincerely thank all
taxpayers that have contributed towards paying taxes through
the Malawi Revenue Authority and this is reflected in the
satisfactory performance of domestic revenues as presented
earlier in this Budget Statement.

The domestic revenues collected from taxes, user fees and
charges have assisted Government in the provision of the
necessary social services such as purchase of drugs,
construction of roads and schools and other important social
amenities. Specifically, Mr. Speaker, Sir, I wish to give
examples of roads that have been constructed using domestic
resources and these include: Ekwendeni-Ezondweni-Mtwalo-
Njakwa , Lumbadzi-Dowa-Chezi-Ntchisi and Bangula - Nsanje
roads. I therefore wish to urge and encourage all Malawians to
continue being compliant by remitting their taxes to contribute
towards national development.

11.2. Tax and Non-Tax Policy

Mr. Speaker, Sir,
I wish to inform this august house that
in this Budget it will be observed that the measures show that
Government remains committed to support the sectors that
have been identified as priority areas under the ERP.
Mr. Speaker, Sir, allow me to now articulate the Non-Tax and
Tax revenue policy measures for the 2013/14 Budget.

11.3. Non Tax Measures

Stamp Duty

Mr. Speaker, Sir,
in order for Malawi to improve on the
ease of doing business ranking with a view to create a pro-
business environment, Government has reduced stamp duty
under the Registrar General from 3 percent to 1.5 percent .
This measure is in line with the Doing Business Reforms that
Government is currently implementing with a view to make
Malawi an attractive investment destination.

11.3. Tax Measures

Mr. Speaker, Sir,
allow me to now present the tax
measures for the 2013/14 Budget as follows:

11.4. Customs and Excise Tax Measures Incentives for the Tourism Sector

Mr. Speaker, Sir,
in an effort to further support the
Tourism Sector, Government has removed taxes on off-road
game/scenery viewing motor vehicles (Safaris). In addition, Mr.
Speaker, Sir, to ease the problem of transportation of guests in
our Hotels and Resorts, Government has also removed taxes on
shuttle buses. This provision will allow Hotels, Lodges and Inns
with guest capacity of 50 rooms or more to import two shuttle
buses every five years without payment of duties.

Incentives for the Construction Industry

Mr. Speaker, Sir,
in the previous Budget, taxes on most
machinery were removed in order to promote the various
productive sectors of the economy. In this Budget, Government
has further removed taxes on crane lorries, concrete mixer
lorries, mobile drilling derricks and track laying tractors for the
construction Industry to boost the industry.
Incentives for the Agricultural Sector

Mr. Speaker, Sir, most of the agricultural equipment and
machinery are exempted from duties. In order to encourage
diversification and promote animal husbandry in the country,
Government has removed taxes on importation of livestock
meant for breeding and this will cover live bovine animals, live
swine, sheep and goats as approved by Ministry of Agriculture.
This is in line with Her Excellency's' vision of one cow per
family which aims at empowering households especially the

Incentives for Electricity Generation and Distribution

Mr. Speaker, Sir, Government has noted the need to
involve other business players in the energy sector and to
encourage investment in this sector. Government has therefore
extended the Custom Procedure Code for ESCOM under the
Customs and Excise Tariffs Order to allow all investors to
import electricity generation and distributing equipment
without payment of import duty. It is believed that this will
encourage investment in the energy sector and also improve
the electricity generation and distribution capacity for the
country and support the industry that requires use of
electricity for production.

Incentives for Mining and Exploration Industry

Mr. Speaker, Sir,
mining has been identified as another
2013/14 Budget Statement
Page 25
area that can foster economic development, as the Nation
continues to diversify. Honourable Members, in support of this
sector, Government has re-introduced a provision under the
Customs and Excise Tariffs Order to allow for exemption of
taxes on importation of specialised mining and exploration
machinery and equipment in order to encourage exploration
and mining activities in the country.

Incentives for Television and Radio Stations

Mr. Speaker, Sir, it is clear that access to information and
the promotion of investment in Information and
Communication Technology (ICT) remain critical. In support of
this, Government has removed taxes on specialised
broadcasting equipment for Television and Radio stations to
further improve access to information.

Rebate for Travellers

Mr. Speaker, Sir,
the amount provided as an allowance
under Customs Procedure Code 429 for Travellers in the
Customs and Excise Tariffs Order, has been increased from
MK150,000 to MK300,000 to take into account the changes in
the economic environment. I wish to emphasize that this rebate
applies to travellers with accompanied baggage for personal
use and not commercial consignments. In order to further
facilitate clearance of passengers at our Airports the Malawi
Revenue Authority will adopt a risk based approach by
introducing the Green and Red lane with random checks.

Duty on Bicycles and Motorbikes

Mr. Speaker, Sir,
it remains the wish of Government to
ensure that all Malawians especially the under-privileged are
able to access cheaper and affordable modes of transport. In
view of this, Government has removed, yes, totally removed,
import duty on bicycles. In addition, import duty on
motorbikes of engine capacity not exceeding 250cc, has been
reduced to 15 percent and excise tax on these motorbikes has
also been removed considering that this mode of transport is
widely used especially in the rural market areas.

Duty on Inverters

Mr. Speaker, Sir,
Government remains committed to the
promotion of the use of clean energy and in this regard. Most
of the items used for solar power generation are exempted from
duty as announced in the previous Budget. In order to make
clean energy affordable to Malawians, import duty payable on
inverters has been reduced to 0percent considering that
inverters are critical in the generation of solar power.

Taxation of Buses

Mr. Speaker, Sir,
in order to improve affordability, safety
and comfort of passengers and to decongest the streets of our
cities and towns, Government has reduced import duty to 15
percent on motor vehicles of seating capacity of 11 to 31
persons including the driver, and motor vehicles of seating
capacity of 32 to 44 persons including the driver, regardless of
engine capacity and year of make. In addition, excise tax has
been reduced on motor vehicles of seating capacity of 32 to 44
persons including the driver depending on year of make as
follows: 0percent for new and used motor vehicles not
exceeding 8 years, 10percent for used motor vehicles
exceeding 8 years but not exceeding 12 years and 25percent
for used motor vehicles exceeding 12 years.

Mr. Speaker, Sir, Government would like to urge operators of these buses to
ensure that the benefits trickle down to the consumer through
reduced transport fares.

11.5. Income Tax Measures

Tax Holiday - Designation of Priority Industries

Mr. Speaker, Sir, in order to encourage value addition in
the Agricultural Sector, Agro-processing shall be designated as
a priority industry for purposes of tax holiday as required
under the Taxation Act, 11th Schedule. In addition , Electricity
Generation and Distribution shall also be designated as a
priority industry.

Mr. Speaker, Sir, I wish to inform this August
House that Ministry of Finance is working closely with
stakeholders in other sectors where this tax holiday provision
can also be applied. It is clear that investors are showing keen
interest to invest in these areas if given the right fiscal

Mr. Speaker, Sir, Government deprives itself from
revenues from corporate taxes by letting investors benefit from
tax holidays. It is therefore imperative for all investors that
shall benefit under this provision to ensure that they remain
committed to deliver the desired outputs such as; production
for export, value addition, employment creation and generation
of forex for the economy. In view of this, Government will
closely monitor performance and is at liberty to withdraw this
incentive where there is evidence of abuse or
underperformance depending on the agreed benchmarks.

Loss Carry Forward Provision

Government has reduced the indefinite loss carry forward
provision under section 42 of the Taxation Act, to 6 years for
the manufacturing sector in order to encourage investment in
profitable business ventures.

Interest and Transfer Pricing

Mr. Speaker, Sir,
the Taxation Act has also been reviewed
and slightly amended in some sections to provide for tax
administration adjustments. In this regard, Mr Speaker, Sir,
section 105 (5) and (6) of the Taxation Act on Interest has been
amended to remove the insignificant amounts of MK22 and
MK5.50 contained therein. In addition section 127(A) of the
Taxation Act regarding Transfer Pricing has been reviewed to
incorporate transactions of related parties who are both
resident in Malawi. Previously, this provision recognised
transfer pricing transactions between a resident and non-
resident party.

Pay As You Earn (PAYE)

Mr. Speaker, Sir,
it is clear that Malawians are beginning
to witness signs of recovery in our economy. However in some
cases the impact of the devaluation and its inflationary effects
are still being manifested in the economy and this is affecting
the welfare of the people. As a mitigating measure Government
has increased the 0percent threshold for PAYE from MK15,000
to MK 20,000 and the next MK5,000 will be taxed at 15 percent
whilst the excess will be taxed at 30percent .

Withholding Tax for Cross-Border Traders

Mr. Speaker, Sir,
Government has noted that small tax
payers including our smallholder farmers suffer withholding
tax when they sell their agricultural products. I wish to report
to this august house, that there are quite a large number of
locals and foreigners who are involved in cross-border trading
but are not paying income taxes to Government. Mr. Speaker,
Sir, in order to ensure equity and fairness in the tax system
and to ensure that most of the traders pay income tax,
Government is extending a 3percent withholding tax on all
imports Mr. Speaker, Sir, I wish to clarify that all registered
taxpayers with Withholding Tax Exemption Certificates will be
exempted from this withholding tax. Distinguished colleagues,
withholding tax is an advance tax and not a final tax meaning
that the amount paid on withholding tax on imports is tax
deductible upon submission of a tax return by a taxpayer.

11.7. Excise Tax Measures

Excise Tax on Matches and Ball-Point Pens

Mr. Speaker, Sir,
Government continues to review the
excise tax regime as indicated in the last Budget Statement. In
view of this, excise tax on products such as matches has been
removed considering that this is a basic commodity and has no
negative externality that could make it liable for excise tax. In
addition, Mr. Speaker, Sir, excise tax on ball point pens has
been removed.

Excise Tax on Flavoured Mineral and Aerated Waters and Non-alcoholic Beverages

Mr. Speaker, Sir,
in order to harmonise the application of
excise tax and also to promote the local industry, Government
has reduced excise tax from 20percent to 10percent on waters,
including mineral waters and aerated waters, containing added
sugar or other sweetening matter or flavoured, and other non-
alcoholic beverages, not including fruit or vegetable juices
classified under Heading 20.09 of the Customs and Excise
Tariffs Order.

11.8. Value added Tax Measures

Threshold for VAT Registration

Mr. Speaker, Sir,
in order to align VAT registration
threshold with the prevailing economic environment and levels
of inflation which have a direct influence on VAT Government
has increased the VAT registration threshold from MK6 million
to MK10 million.

VAT on Internet Services

Mr. Speaker, Sir,
Government has introduced a standard
rate of 16.5 percent VAT on Internet services in order to allow
Internet service providers claim input VAT and this will in turn
reduce costs associated with the provision of internet services
thereby making internet services relatively cheaper and
accessible to users.

VAT on Machinery

Mr. Speaker, Sir,
in order to promote national
development through use of machines in the construction and
transport industry Government has removed VAT charged on
other lifting, handling, loading or unloading equipment such as
conveyors, teleferics classified under Heading 84.28 of the
Customs and Excise Tariffs Order.

VAT on Raw Materials under Industrial Rebate

Mr. Speaker, Sir,
members of this August House may
recall that in the 2012/13 Budget Government removed VAT
on raw materials imported under industrial rebate. This
measure was implemented to ease the challenge that
Government was facing with accumulated arrears of tax
refunds. I wish to report that in the 2012/13 fiscal year
Government has managed to clear the backlog of tax refund
arrears that were accumulated. Considering the improvements
in the refund management system, Government has
reintroduced a standard rate of 16.5percent VAT on raw
materials imported by manufacturing industries registered
under Industrial Rebate. This policy has been reinstated
considering that the refund management system has improved
in the 2012/13 fiscal year and to ensure compliance with the
VAT principles of Taxation.

11.9. Administrative Measures

Customs and Excise

Mr. Speaker, Sir,
there are several tax administrative
measures that have been done and cover issues relating to
proper classification in the Customs and Excise Tariffs Order
of items such as:
food supplements, iron/steel and
alluminium caskets, and articles of wood including proper
definition of "furnishings" under Customs Procedure Code 442
for Hotels, Inns and Lodges covered in the Customs and Excise
Tariffs Order, to avoid abuse arising from mis-description. In
addition various customs fees and charges have been reviewed
and adjusted accordingly.. The details of these revisions to the
various Customs fees and charges and other services will be
outlined in a Technical Notice that will be published by the
Malawi Revenue Authority.

11.10. International and regional Trade Agreements COMESA Simplified Trade Regime

Mr. Speaker, Sir,
in order to conform with the agreement
made under the COMESA Simplified Trade Regime programme
which aims at promoting small cross border trade amongst
COMESA countries, Government has aligned the processing
fee for processing customs documents under the COMESA
Simplified Trade Regime (STR) to USD1.00 equivalent to
Malawi Kwacha in line with COMESA obligations.

Mr. Speaker, Sir, in an effort to adhere to commitments
made under the COMESA and SADC Trade protocol, Malawi
will continue to adopt instruments that will facilitate the
implementation of deeper regional integration with a view to
encourage intra-regional trade for the benefit of the regional
economies. In the last fiscal year Malawi was able to reduce
and align its tariffs in line with the commitments made under
the SADC Tariff phase down after a long period of stagnation
amidst the economic challenges that were being experienced.
Although the country is operating under tight fiscal regime ,
Malawi remains committed to implement the obligations agreed
under the COMESA and SADC integration agenda respectively.
Avoidance of Double Taxation Agreements (DTAs)

Mr. Speaker, Sir, Malawi is actively reviewing and
negotiating new Avoidance of Double Taxation Agreements
(DTAs). These bilateral Agreements assist countries to
eliminate double taxation of income by allocating taxing rights
to the resident country, with a view to alleviate tax evasion and
fiscal fraud through the exchange of information. Efforts are
being made to terminate all the old DTAs that are porous and
are being grossly abused by unscrupulous investors and also
to ensure that the country has new DTAs with other countries.
120. In conclusion Mr. Speaker Sir, I want to echo what the
President Joyce Banda said in her remarkably visionary State
of the Nation address, namely, that "the road to recovery is not
easy". However, it is always gratifying when efforts result in
positive developments. As the President pointed out, and as
others have observed, the tough and painful measures that we
put in place have begun to bear fruit.

Mr. Speaker, Sir, there had been a general expectation
that signs of recovery would begin to show in 18 months, but
the recovery actually started earlier than anticipated. As I said
earlier, due to availability of foreign exchange and fuel,
capacity utilization in industry has improved, such that
companies that would have closed down resulting in
unemployment were able to stay on their feet, and a significant
number of firms were even able to expand, thereby creating
more jobs.

Mr. Speaker, Sir, commentators on the Malawi economy
have often used the metaphor of a patient requiring medical
attention. It so happens, Mr. Speaker, Sir, that the patient has
been taking some pretty painful medications. That we agree,
because the nature of the illness required a really strong
dosage to be taken over a considerably long period.
123. Now there are signs that the patient is getting better.
There are signs that indeed, the patient is very much on the
road to recovery, thanks to the medicines he has been taking.

What we in Government find amusing, Mr. Speaker, Sir,
is the attempt by various commentators p to give the
impression that the patient's improving condition has
absolutely nothing to do with the medicines he has been

Instead of giving credit to the medicine, there is now a
frantic search for the cause of this healing process. Suddenly,
it seems to cause of this improvement in the patient's condition
has become a mystery. Questions are being asked: Is it
perhaps only because of the season? Is it perhaps the tobacco,
or the maize, or could there have been a massive depreciation
of another currency which has caused the Kwacha to gain
weight? Could this be temporary? In fact sometimes we even
seem to be hoping that it is temporary, almost hoping for a
return to the really bad days of yesteryear. There is an
obsession with negativity and the glorification of the sad
mentality which is preventing otherwise reasonable people
from accepting the very obvious linkage between cause and

Mr. Speaker, Sir, I urge those engaged in this fruitless
search to search no more. The reasons for the stabilization of
the kwacha and the availability of fuel are staring us all in the
face: the reasons are the very same economic reforms and
measures which this House debated and wisely approved. The
reasons lie in the legislation regarding human rights which this
House passed. The reasons for the emerging recovery have to
do with the restoration of damaged relations with our
development partners which this House applauded last year.
127. I submit Mr. Speaker, Sir, that all Malawians should take
credit for encouraging President Joyce Banda to address the
nation's economic challenges, and the President should take
credit for heeding the call. Civil society should take credit for
demanding that Government takes action to save our economy
from total collapse last year. I submit that this honourable
House should take credit for approving the tough measures in
the current budget aimed at restoring the economy.
128. As for the fact that this is all because of the tobacco, let
us remind each other that we did have a tobacco season last
year. Among other factors, a conducive environment at the
tobacco auction floors, good rains provided by the Almighty
God, and good policies being implemented at the Ministry of
Agriculture have contributed to this being a good year, just as
an up scaled Fertilizer and Subsidy Programme has
contributed to a good maize harvest which is helping drive
inflation down.
129. Suppose, as the doomsayers and professional cynics say,
all this proved to be temporary. Well, we all know about the
seasonal structure of our economy. It is true that our economy
is characterized by seasonality. It is equally true that in the
past two years we experienced the seasonality phenomenon.

However, there was no recovery during those two years. But should we just sit back and lament that the
encouraging signs we see T the moment are only temporary
and therefore we should continue looking sad like professional
mourners because come December the kwacha will weaken
again? We in government, we in the People's Party, do not think
so. We believe that with the right policies in place and hard
work, the lean season can be broken. We do not have to accept
the seasonal structure of our economy as a permanent
condition, a permanent curse, of our nation.

It is possible to grow more crops and ensure that there is
plenty of food available in the lean season. That is what
President Joyce Banda has in mind when she talks about the
second crop and more robust use of irrigation. It is possible to
create an environment in which the private sector is more
productive and exports more in order generate more foreign
exchange that would ensure that we have adequate reserves
even in the lean season. That is what our tax measures and the
reforms being implemented by the Minister of Industry and
Trade seek to achieve.

Working together in unity as the President has appealed;
we can kill the lean season, or at least make it less lean, and
at long last change the structure of our economy. It may not
happen in one year, and in fact it need not happen in one year,
but it is possible, and with PP leadership it will happen.

One of the ways to achieve this and ensure
macroeconomic stability is to continue upholding the policies
that we put in place in the 2012/13 fiscal year. We must
maintain the tightness of the fiscal stance. We must continue
with the tight monetary position.

We need in the short to medium term to be able to reduce
the interest rate to allow meaningful and profitable investment
for the private sector.

In this regard, Mr. Speaker, Sir, Government's pre-
occupation in the next budget will be to bring inflation down
while at the same time ensuring optimal investment in the
private sector. I wish in this regard to call the private sector to
do a serious self-assessment of the relevance of their
investments. We expect the private sector to play its role as an
engine of economic growth and invest in productive sectors
that will spur economic growth.

I would also like to take this opportunity to express my
profound gratitude to my colleagues in Cabinet for their
support and encouragement in the implementation of the
budget and the drawing up of the new budget. Supporting me
was not always easy for them in view of the fact all too often
they had to take "No" for answer from me.

I have learnt, Mr. Speaker, Sir, a lot from all colleagues in
this Honourable House who in one way or the other have given
us good suggestions on how to implement the budget. Off
course, some of these suggestions were by way of criticism and
I took them with humility.

In particular, Mr. Speaker Sir, I would want to
acknowledge the advice from the standing committees of this
noble House starting with the Budget and Finance Committee,
the Public Accounts Committee and indeed many other sector
committees. I have enjoyed a good working relationship with all
these. We may not have agreed on a number of issues but that
is the nature of democracy and I remain convinced that every
individual member of these committees is driven by not selfish
interests, but by a wish to do good for our beloved country.

I also wish to thank our development partners namely DFID of the UK, the African Development Bank, World Bank,
Global Fund, Norway, Ireland, Germany, the European Union,
USAID, JICA, and many others. They always stand by us in our
time of need. Apart from their financial assistance, we also
benefited greatly from their suggestions and advice on how to
implement our programmes. It is my sincere hope and prayer
that the good and cordial relationship existing between our
development partners and this country will grow from strength
to strength.

Mr. Speaker, Sir, I would also like to express
government's appreciation to civil society organizations who
never miss an opportunity to let us hear their views on the
economy and other related issues. We remain convinced that
as government we have a duty and responsibility to listen to
everyone and especially to those who disagree with us or offer
alternative views.

Lastly but not least, I want to thank the hardworking men
and women of our Economic Management Team: members of
Staff in my Ministry, my friend the Minister of Economic
Planning Development and his fine team, the Reserve Bank of
Malawi, National Statistical Office and the Malawi Revenue
Authority for their tireless and commendable efforts to stay on
course with the programme. Mr. Speaker, Sir, without these
very dedicated and professional ladies and gentlemen it would
have been difficult to implement these reforms and for me to
present this budget. These are the unsung heroes of the
Economic Recovery Plan.

But Mr. Speaker there is another group of people that I
know are also here that deserve the continued appreciation of
the nation. They are not exactly donors, but they certainly
qualify to be called development partners. I am talking about
the taxpayers, big and small. Some of the big ones from the
corporate world are represented up there in the galleries and
the smaller ones are there too.

We do not always get well with taxpayers, Mr. Speaker.

Some of them given a chance would rather find some legal way
of avoiding the paying of tax, and we sometimes have to engage
in cat and mouse chases with them. Actually this is not
peculiar to Malawi, as we have seen in recent international
headlines. Ingenious tax avoidance and tax evasion tricks go
back in history to the day the very idea of paying taxes was
invented by mankind. Some of our taxpayers make really
unreasonable demands and are frequent visitors to my office or
that of the Commissioner General.

But they are all good men and women and when eventually they do pay their taxes, their money is what builds
many of the roads and bridges, the hospitals, and the schools in which our young people learn. So, on behalf of government, I salute all the taxpayers of Malawi and urge them to continue paying their taxes with a smile.

Mr. Speaker, Sir, I beg to move.


Friday, May 17, 2013


Republic of Malawi

On the occasion of


Friday, 17th May, 2013
















Mr. Speaker, Sir, it is a great pleasure to be here this morning to preside over the opening of the 2013/2014
Budget Meeting and deliver the State of the Nation Address.

This occasion is very significant because, as is tradition, we reflect on the past year and set out our plans for the coming year and the future.

Mr. Speaker, Sir, as you all know, I took Office on 7th April, 2012 under very difficult circumstances and amidst many
uncertainties. Our economy was on the verge of collapse.

Most of the cooperating partners had expressed huge concerns over our situation of poor human rights and economic governance, to the extent that others suspended their direct budget support to Malawi. There was a spirit of
despair in the country.

Mr. Speaker, Sir,
against this background, in my State of the Nation address on 18th May last year, I clearly set out my vision to eradicate poverty through economic growth and wealth creation. In my address I spelt out the two objectives for my Government, namely:

a) To unlock the potential of the Malawian people to regain their freedom, dignity and sense of pride and
thereby give Malawi the opportunity to realise her social, political and economic freedoms; and

b) To drive a people’s development agenda that enhances opportunities; reduces inequalities; and overcomes
poverty through its political, social and economic programs.

I called upon all Malawians to join me to work together and rebuild our economy. I also announced a national austerity
drive that would be painful but necessary.

Mr Speaker, Sir, allow me to acknowledge all sectors of our society: private sector, non-governmental organisations, the faith community, traditional leaders and the general public for the support and resilience demonstrated in the past year. I also wish to extend my gratitude to the development partners for the support in various forms that they provided to my government in the past year.

As a result of decisive action by my Government to institute reforms that would recover the economy, we have started to experience the first signs of the recovery.

Mr. Speaker, Sir, I am pleased that even though prevailing circumstances forced us to make some difficult decisions, they were the right decisions. Mr. Speaker, Sir, I am very thankful that Malawians have stood with me and continue to do so as we start to see the fruits of our reforms.

Mr. Speaker, Sir, indeed we must remember that the road to full recovery is long. I therefore wish to appeal to all Malawians to remain steadfast and resilient until we reach the full recovery we envisage.

Mr. Speaker, Sir, in the last year my Government has focused on laying the foundations for healing and recovery.

Building on these foundations will be the focus for the next phase. We are called upon to set new goals to guide us
along the road to recovery and transformation, to sketch a landscape in which we can act on our collective dream and
to draft a plan to deliver us from the consequences of our past mistakes.

Mr. Speaker, Sir, as we continue to reconstruct Malawi and reclaim the whole country for all, we break down the
divisions and attitudes of the past. We free everyone from the last forces of oppression and cynicism. The emerging
period must be a period of all Malawian peoples, to continue working together, building the nation. For it is only when we strive towards this unity, as a people with one destiny, that we will release our energies, enabling us to fully rebuild this great nation.

Mr. Speaker, Sir,
It is our task to make the most of our freedom, to entrench it as a fundamental and permanent
feature of our existence. It is our task to continue to work for democracy and good governance in the coming years
ensuring that peace and stability prevail throughout this country.

It is our task to manage the economy with prudence and diligence to ensure inclusive growth and prosperity. The
challenge facing each and every one of us is to contribute to a complete and rounded picture of the emerging period.
Mr. Speaker, Sir, the theme of my address is therefore:Malawi on the Road to Transformation.

Mr. Speaker, Sir, I believe that we have laid a solid foundation for hope, prosperity and growth. During the year
under review, we have brought Malawi back from the brink – politically, financially and economically.

We are now in a position where we can begin to focus more clearly on the long term.

Restoring Governance

Mr Speaker, in the last year, my Administration sought to restore the foundations for good governance, freedom and
human rights in Malawi as the underpinnings of the development of our nation, both in the short term and in the
long term:

- My Government has repealed most of the oppressive laws that impinged on peoples’ freedoms and rights.
These include Section 46 of the Penal Code which empowered the Minister of Information to close media

- New media operations are free to start up as my Government has liberalised the issuance of radio and
TV licenses based on the quality of their application and not on political considerations. Organisations that were
refused licenses can now operate freely without harassment,restrictions and violence against journalists.

- I note that these changes have contributed to Malawi being the country which made the biggest leap in the
2013 World Press Index on press freedom. As a result of my Government’s actions, Malawi has moved from
position 146 in 2012 to position 75 in 2013.

- Citizens are now able to organise demonstrations without Government interference or violence against them. The January 17th demonstrations organised by Consumer Association of Malawi (CAMA) are a clear testimony to my government’s commitment to freedom of assembly and expression.

- We have also seen tolerance and mutual respect return to Government’s relationships with civil society leaders
and organisations, where they are recognised as true partners in Malawi’s development.

Looking forward, my Government is committed to the democratic process and free and fair elections in 2014 and
beyond. We have already passed the Constitution (Amendment) Bill 2012 to allow the holding of Tripartite
Elections next year. We have also appointed Commissioners for the Malawi Electoral Commission from all political

Mr Speaker, Sir, through all these measures, we have shown our commitment to fundamentally transform the way that
the Government relates to its people, and how Government works for its people.

Mr. Speaker, Sir,
I want to assure this august House that these governance success stories will be deepened in the
coming year and my Government is committed to democratic governance, dialogue, rule of law and access to

Macroeconomic stability

Mr. Speaker Sir, let me highlight the fiscal performance for the First Half and Third Quarter of the 2012/13 Financial Year and thereafter, the proposed fiscal plan for the 2013/14 Budget.

As you may be aware Mr. Speaker Sir, when my administration ascended into office, the Extended Credit
Facility (ECF) programme with the International Monetary Fund (IMF) resumed. Since the resumption of the
programme, two reviews have been successfully undertaken in November 2012 and March 2013, respectively.

Mr. Speaker Sir, to date, a total of US$274 million has been released as Balance of Payments Support after meeting most of the agreed programme targets signifying a step in the right direction. This amount excludes the other forms of support that my Government has received from Cooperating Partners such as for emergency drugs procurement, as well as project support.

In the just ended ECF review, Mr. Speaker, Sir, I am pleased to inform the August House that my Government met most of the quantitative targets, including the Net International Reserves and Net Domestic

Mr. Speaker Sir,
my Government adopted a tight fiscal regime anchored by No Net Domestic Financing (NNDF)
meaning that at the end of the financial year, net domestic borrowing should be zero. The main purpose of the fiscal
anchor is to control expenditure overruns and assist the building of foreign reserves and bring down inflation.

Mr. Speaker Sir, in spite of the many challenges facing the Government, the fiscal performance for the 2012/13
financial Year was on track. Overall domestic revenues surpassed the target by K0.6 billion, largely on account of tax revenues, which amounted to K120.9 billion against a program target of K118.9 billion. However, non-tax
Revenues underperformed by K1.5 billion largely on account of low collection from fuel levies and Revenue-collecting
Departments such as Lands and Housing and Road Traffic.

Mr. Speaker Sir, Government contained its expenditures within the target. A total of K242.6 billion was spent against a mid-year target of K249.8 billion.

Mr. Speaker Sir, on the basis of the developments above,government repaid domestic debt amounting to K18.2 billion against a repayment target of K17.7 billion, a slight over-performance by K0.5 billion and thereby reduced the stock of domestic debt from K188.9 billion to K170.7 billion.

Mr. Speaker Sir, the fiscal performance for the 3rd Quarter of 2012/13 financial year continues to be encouraging, giving confidence that our end year target will be met.

Domestic revenues continued to perform well, exceeding the target of K66 billion by K5.3 billion. We however missed the target of dedicated grants by K7.7 billion on the Education SWAP.

Mr. Speaker Sir, the projected expenditure for the third quarter of 2012/13 was K119.3 billion. However, K120.9 billion was spent representing a marginal over-expenditure of K1.6 billion. This was largely on account of under-performance of dedicated grants and thereby missing the domestic borrowing target by about K3.0 billion. We are
however, optimistic that by close of the year, we will recover and meet all our targets.

Mr. Speaker Sir, as you might be aware, the major pressure points on the budgeted expenditure during the quarter
emanated from wage and salary increases. In order to meet this demand, a corresponding cut was made across the
board on other expenditure lines especially other recurrent transactions (ORT) so as to remain within the targets. Mr.
Speaker Sir, going forward to the end of 2012/13 fiscal year,we expect to remain within our targets. I am aware of the
many pressure points, however, it will be very critical that we remain on target if we are to consolidate and sustain the progress achieved so far.

Mr. Speaker Sir, the Ministry of Finance has developed a medium term macroeconomic framework from 2013/14 to
2015/16 financial years.

Mr. Speaker Sir, the framework draws lessons from the successes as well as implementation
challenges of the 2012/13 budget which was aimed at initiating and galvanizing recovery from the economic
slowdown experienced prior to the reforms.

Mr. Speaker Sir, precedent to the development of the framework was the following actual performance of the
economy and underlying assumptions.

Mr. Speaker Sir, the Gross Domestic Product (GDP) growth for 2012 was revised downward from an earlier estimate of 1.9 percent to 1.8 percent. The economy is however,expected to rebound as GDP growth surges to around 5.0percent underscoring the success of the economic reforms that my administration implemented in 2012.

Furthermore, Mr. Speaker Sir, prospects for 2014 indicate that the economy will grow at an accelerated pace of 6.1
percent as the policy measures we implemented in 2012 take full effect.

Mr. Speaker Sir, inflation is expected to be relatively high for the remainder of the year. We however expect a sharp
deceleration in inflation in 2014 to an average of 7.4 percent. My administration will therefore continue to pursue
with vigour to bring down inflation and achieve a continued appreciation of the local currency to sustainable level.

Mr. Speaker Sir, building on the 2012/13 financial year, fiscal consolidation and supportive monetary policies aimed
at restoring and recovering the macroeconomic environment will continue. In this regard, the Fiscal Anchor for the
2013/14 financial year shall be “a continued No Net Domestic Financing with a net repayment of domestic debt
of 0.5 percent of GDP” which is equivalent to K6.8 billion by the end of the financial year.

Furthermore, Mr. Speaker Sir,the 2013/14 Budget aims to provide a consistent and coherent economic policy framework to underpin our development objectives. The emphasis continues to be on enhancing the sustainability of growth and development through policies that consolidate economic stability, reinforce resilience to shocks, both internal and external, further improve public financial management, and support private-sector-led growth.

Mr. Speaker Sir, it is important at this point in time for the august house to note that there is need to finance the 2014 tripartite elections. The 2013/14 financial year budget will be contractionary resulting in a number of pressures that are anticipated in the course of implementation.

Allocations to Ministries and Departments will be constrained due to limited resources. It will therefore be necessary that Government Ministries and Departments be economical in the use of resources allocated to them. Only priority activities should be under taken.

Mr. Speaker, Sir, I would like to appeal to the Nation to continue to be understanding and appreciate the situation
our Nation is in. For us to build the economy, we need the support from all the people of Malawi. The developments we
have seen in the past 12 months must give us hope that the reforms are working. Yes, there has been pain, and we may
continue experiencing pain, though at a reduced level for some time. This is expected in any situation like we found
ourselves in.

Mr. Speaker Sir, it is expecting a miracle for one to recover from the economic death bed without feeling pain. The pain we are suffering is the price we are paying for allowing ourselves into the situation we found ourselves in. It is my hope and prayer that we will learn from the past and accept that procrastinating to take tough decisions for short term gains or to feed our personal political greed will always lead to painful situations.

Removing bottlenecks to economic growth

Mr. Speaker, Sir, when I took over Government, the private sector had challenges with predatory tax audits, and unfair
and arbitrary appeals procedures by the Malawi Revenue Authority. All these problems are now history.

Government has reviewed and simplified the tax regime to make it friendly to business, investors, and to support our
job creation agenda.

Mr. Speaker, Sir, procedures for business licensing, work permits and visas have also been reviewed and simplified to
encourage foreign investment and tourism into Malawi.

Mr. Speaker, Sir, upon assuming power, Government quickly resolved the fuel supply challenges that gripped the
country. The prudent macroeconomic policies that were put in place have made it possible for us to procure fuel on a
sustained basis, such that our fuel stocks have increased from being negative to 11 days. Government will now focus
on increasing storage capacity.

Mr. Speaker, Sir, my Government also revived the Millennium Challenge Compact which was suspended by the United States Government. I am further pleased that the MCA Malawi Office is now established and setting all background work for the implementation of the compact.

Government has signed the World Bank funded Inter-connector electricity project with the Mozambican Government. Negotiations with many Independent Power Producers in the energy sector are at very advanced stages.

These initiatives, Mr. Speaker, Sir, are aimed at creating a conducive environment for economic growth in our country,
as energy is key to any meaningful development.

Increasing and diversifying exports

Mr. Speaker, Sir, one of my Government’s significant achievements has been to intensify the production and
diversification of cash crops that have a bearing on our exports.

Government approved the Integrated Production System last year. Following this approval, tobacco buyers started
supporting our farmers by contracting them to produce good quality tobacco in order to attract premium prices on the

The total projected volume for the 2012/2013

marketing season is about 156 million kg, almost double the 79 million kg sold in the 2011/2012 season. The projected
volume is expected to realize more than US$300 million as compared to US$177 million in the 2011/2012 season.
Mr. Speaker, Sir, since the opening of the tobacco marketing season, our farmers have been offered better prices on
average than last year.

Projections for other cash crops like cotton, tea, coffee, maize, rice and legumes have also increased this year.

Mr. Speaker, Sir, last year, I launched the National Export Strategy (NES) (2013 – 2018) to boost exports, create
employment and enhance revenues. The NES sets out a path to diversify into new export sectors, and crucially move
from exporting raw commodities to value added goods. To do this, the NES has looked at those areas where Malawi has a
natural competitive advantage, those industries with scope for value addition and crucially where there is strong and
growing demand.

Mr. Speaker, Sir, my Government has operationalized the all stakeholders Trade, Industry and Private Sector Development Working Group in order to facilitate and fast track the implementation and monitoring of the National
Export Strategy.

Reorganising Industry

Mr. Speaker, Sir, my Government recognises that the private sector is the engine of economic growth. For years now,
Government business in the market had been too big. My Government is committed to reducing the scale of
Government in order to unlock the potential of the private sector.

Mr. Speaker, Sir, Government has undertaken to restructure the tobacco industry and the review of the Tobacco Act is under way. The Act will reorganise and streamline sector policy coordination.

Mr. Speaker, Sir, Government will establish the first ever Tea Auction Floor in Malawi later this year. This will allow tea to be sold here in the country. It is hoped that this will help Malawi maximise foreign exchange earnings from tea sales.

Furthermore, Malawi will be able to overcome the foreign exchange lean period experienced between October
and March.

The Livestock Industry has also been reorganised to promote dairy, meat and leather sub-sectors. This is to encourage
diversification out of agriculture into manufacturing and agro-processing. Government has already engaged Investors
to set up factories in dairy, meat, and leather.

Mr. Speaker, Sir, Government is in discussion with the Nyasa Manufacturing Company to enter into a public private partnership for the expansion of their cigarettes manufacturing factory.

Mr. Speaker, Sir, I am pleased to inform this august House that a Dubai based company is establishing a textiles factory here in Malawi. The company has already identified a site and opened their offices in Lilongwe.

Mr. Speaker, Sir, I am pleased to report that earlier this year I visited a state-of-the art agro-processing facility for production and exportation of Mango and Banana pulp which is under construction. The project is managed by MM (Operations) Limited in Salima and is the first of its kind in Malawi.

It will set the pace for an increasingly dynamic and diversified agro-processing sector.

Mr. Speaker, Sir, my Government also remains committed to promoting the cotton industry as a way of broadening our export base. During the 2012/2013 financial year,government supported farmers with extension services and
distributed 38,918 metric tonnes of certified cotton seed under the Cotton Up-Scaling Programme.

Mr. Speaker, Sir,
one great achievement in the cotton sub-sector this year, was the passing of the Cotton Act by this House.

The Act provides for a regulatory framework in the cotton industry and facilitates the participation of the private sector in the production and processing of cotton. In the next few months, my Government will commission cotton ginneries in Chikhwawa, Salima and Karonga districts.

Mr. Speaker, Sir,
Sunseed Oil Ltd is putting up a plant to process such crops as soya beans, sunflower, and
groundnuts into edible oils and animal feed for both local and export markets. This will help Malawi save US$45
million in crude oil imports. Furthermore, the company projects that it will earn about US$52 million from the
export of soya cake.

Mr. Speaker, Sir,
my Government is also reorganising non-agricultural sectors to promote greater investment and
competition. In the area of transport, Government is implementing an open sky policy to allow more and competitive flights in and out of Malawi.

In this regard, Mr.Speaker, Sir, I wish to report that Government identified Ethiopian Airlines as a strategic partner for Air Malawi.

The new Air Malawi (2012) Ltd is expected to start operations once all the mandatory requirements have been fulfilled.
As this august House may be aware, Mr. Speaker, Sir, other airlines are also increasing their flights to Malawi.

For the first time, we now have Kenya Airways and Ethiopian Airlines flying to Blantyre.

Mr. Speaker, Sir, there are many other industrial projects that are in the pipeline. These investments clearly
demonstrate the growing confidence in Malawi’s economic recovery programme.

These initiatives will create jobs for our people; create local market for our farmers and broaden foreign exchange
reserve for our country.

Social Protection Programmes

Mr. Speaker, Sir,
under the Social Protection component of the ERP, my Government has implemented policies and
programmes that are aimed at addressing the negative impact of the reforms. Such programmes include the Public Works Programme, Cash Transfer Programme, School Feeding and Bursary Programme, and the Food Aid Programme.

These programmes are designed to meet the needs of vulnerable households.

Mr. Speaker, Sir,
since July 2012, my Government has rolled out the Social Cash Transfer Programme amounting
to MK24 billion. The programme targeted 10 percent of the lowest ultra poor and operated in 15 districts, namely
Mchinji, Salima, Mangochi, Machinga, Chitipa, Likoma, Phalombe, Nsanje, Chikhwawa, Mwanza, Neno, Balaka,Mzimba, Zomba and Mulanje.

Mr. Speaker, Sir,
Government plans to roll out the Social Cash Transfer Programme to all 28 districts by June 2014. The programme will reach a total of 315,000 households benefitting 1.5 million Malawians.

Mr. Speaker, Sir, Government also implemented the Public Works Programme in all 28 districts. In the 2012/2013
financial year, about 600,000 households benefited from the programme. The Government also specially targeted urban
districts for implementation of this program in order to benefit the urban poor households.

Mr. Speaker, Sir,
furthermore, my Government distributed food to about 2 million families that were food insecure. In addition to this, 1.6 million children benefited from the school feeding programme which was rolled out in over 1,000 schools across the country.

Mr. Speaker, Sir, as I have earlier on said, I wish to once again thank Malawians for the resilience and understanding during this difficult time.

Enhancing Income Generation Projects at Household Level

Mr. Speaker, Sir, improving household incomes is high on my Government agenda. In this regard, my Government has put in place a number of initiatives to enhance income generation at household level.

Mr Speaker Sir, my Government is implementing Community Savings and Investment Programme (COMSIP) in order to promote the culture of savings. Participants from Social Protection Programmes are encouraged to participate in savings and investment activities as a graduation process. This component aims at inculcating a culture of savings through capacity building in group dynamics, financial literacy, business management, skills training and cooperative formation.

To date a total of 4,457 groups have been formed and are functional comprising 99,153 members of whom 65,441 are
female and 33,712 are male participants. These 4,457 groups have mobilised a total of MK672 million to date.

These savings are used for on lending for various small scale businesses such as hawkers, restaurants, irrigation, pig
farming and chicken rearing. The groups will now participate in buying cash crops for exports.

Mr. Speaker, Sir,
under the Presidential Initiative on Poverty and Hunger Reduction, my Government committed
resources for the promotion of legumes such as ground nuts, soya beans and pigeon peas. These are high value
crops that have potential to increase household incomes.

Mr. Speaker, Sir, 100,000 smallholder farmers benefited from 1,570 metric tons of legume seed distribution under this programme. It is expected that this will result in an estimated production of 40,000 metric tons of legume in the 2012/2013 cropping season.

Mr. Speaker, Sir, during the 2012/2013 financial year, my Government distributed 8,680 goats and sheep to 140
groups, 5 groups per district. Furthermore 12,600 farmers were trained on goat and sheep management under the Small Stock Livestock Production Project. This programme is on a pass-on arrangement.

Mr. Speaker, Sir, I also launched a One Cow a Family Project aimed at helping poor families to increase their nutrition intake and enhance their household incomes. Through this project, 201 cows have so far been distributed to farmers in Phalombe, Ntchisi, Lilongwe, Zomba, Nkhota-kota and Mulanje districts. Mr. Speaker, Sir, this project will also be implemented using the pass-on principle.

My Government’s target is for the programme to reach 1 million families across the country by end of 2015. Farmers in Ntchisi and some parts of Lilongwe have been trained in cattle management and khola construction. Training is currently underway in Phalombe, Zomba, Mulanje and parts of Lilongwe.

ERP Medium Term Focus Areas

Mr. Speaker, Sir, let me now turn to the five priority sectors of the ERP and highlight the progress that has so far been registered as well as the priority projects that Government has identified.

Agriculture and Food Security

Mr. Speaker, Sir, the agricultural sector is the key source of growth and employment in the country. It accounts for about 36 per cent of GDP, 87 per cent of total employment and supplies more than 65 per cent of the raw material requirements for the manufacturing sector. It also feeds our nation and is central to our efforts to reduce poverty.

Mr. Speaker, Sir, my Government is therefore restructuring the agriculture sector to better serve our objectives of economic growth, employment and poverty reduction.

Managing Farming as a business

Mr. Speaker, Sir,
Government is mobilising farmers through extension services, farmers clubs and cooperatives to move our farming community from subsistence to commercial farming.

Government is also intensifying the popularisation of the Warehouse Receipts Scheme. The scheme provides a ready
market for farmers and motivates them to take farming as a business. For industries, the scheme will guarantee supply of raw materials. As a nation, the scheme will help us aggregate national production, reduce post harvest losses, build up our strategic reserves and increase our opportunities for exports.

Mr. Speaker, Sir, I am pleased to inform this august House that the Export Development Fund (EDF) has earmarked
US$50 million for the Scheme.

Mr. Speaker, Sir,
my Government will establish two departments in the Ministry of Agriculture and Food
Security: one focusing on Rural and Subsistence Farming and another focusing on Commercial Farming.

This is intended to make commercial farming a clear priority of my Government. In this regard, one of the main focus areas of this new department will be commercialisation of maize for both local and export markets.

Diversification for export

Mr. Speaker, Sir, our economy has depended mostly on two crops: maize and tobacco. This has constrained Malawi’s ability to achieve sustainable growth. In view of this, my Government has prioritised diversification of cash crops within the agriculture sector including: rice, cotton, coffee, cassava, and legumes such as groundnuts, soya, sugar beans, pigeon peas, and sunflower.

We are also promoting increased production of flue cured tobacco.

Mr. Speaker, Sir, in order to scale up the programme, Government embarked on production and distribution of
quality seeds for cotton, legumes, and cassava. Government is expanding integrated production system in the tobacco sector and also introducing contract farming in the cotton, cassava and other crops.

A delegation of small scale tobacco farmers left for Zimbabwe to learn new technology for curing the leaf.

Mr. Speaker, Sir, Government has put in place deliberate policy to support private sector investment into agriculture especially commercial farming.

Government will make a concerted effort to remove investment barriers in such areas as land, energy and transport infrastructure and in the issuance of permits.

Expanding production

Mr. Speaker, Sir, in addition to lack of diversification, one of the challenges Malawi faces is low agricultural production.

To address this challenge, my Government is promoting two crops a year through expanded irrigation. Mr. Speaker, Sir,
this will be discussed in detail when I turn to the Irrigation sector.

Mr. Speaker, Sir, Government has also introduced a special loan scheme for agricultural inputs called the Farm Input Loan Program (FILP).

This is a public private partnership programme where private sector will offer loan facilities for inputs to deserving and qualifying farmers. It is my hope,Mr. Speaker, Sir, that this programme will scale up production of maize and other crops, and enhance the country’s food security, household incomes and export earnings.

Mr. Speaker, Sir, this programme will run side by side with the Farm Input Subsidy Programme (FISP).

The Farm Input Subsidy Programme

Mr. Speaker, Sir,
under the Farm Input Subsidy Programme (FISP), my Government increased the number of beneficiaries from 1.4 Million in 2011/2012 to 1.5 million in 2012/2013 fiscal year.

As a result, maize production is estimated to increase from about 3.5 million metric tons in the previous season to 3.6 million metric tons this year. This represents a 1.5 percent increase.

Mr. Speaker, Sir, I am pleased to inform this August House that this year FISP programme registered
tremendous improvements. These include: security of coupons, and uncovering of some malpractices due to
participation of the police in the programme.

Mr. Speaker, Sir, as this august House may be aware, there were some sporadic dry spells in the course of the season that will affect crop production, including maize, in districts like (sic) Rumphi, Mzimba, Salima, Lilongwe, Kasungu and Dedza.

To mitigate this situation and ensure food security, my Government is encouraging and supporting smallholder
farmers to grow a second crop. Government will also ensure that surplus maize is moved to these districts in good time.

Mr. Speaker Sir, in the coming year, my Government will continue to implement the Farm Input Subsidy Programme
because it significantly contributes to economic growth and the attainment of food self – sufficiency.

Livestock Development

Mr. Speaker, Sir, my Government is aware and appreciates the important role that the livestock sector plays in our economy.

Livestock contributes 11% of the Gross Domestic Product (GDP) and about 38% overall agricultural production to GDP.
Livestock constitutes a very important part of food security.

It is a reliable source of income through sales of animals and animal products. Furthermore, livestock products such
as hides and milk are used as raw materials for industrial development.

Mr. Speaker, Sir, the cattle population has now gone up from 650,000 five years ago to 1.2 million, whilst goat
population has risen from 3.4 million to 5.2 million. Despite this improvement, my Government will continue to provide
support for livestock development through animal breeding programs, extension services and improved animal health

Mr. Speaker, Sir, my Government has keen interest in working in close collaboration with the private sector, and non-governmental organizations in this sector.

In view of this, Government will work closely with partners like the Heifer International, Malawi Milk Producers Association and Feed the Future Project in developing the livestock sector.


Mr. Speaker, Sir, my Government acknowledges that the Agricultural Development and Marketing Corporation
(ADMARC) has not performed to the expectation of many Malawians. It has been a major burden on the budget and
as this august House may be aware, ADMARC’s current debt stands at about MK6 billion. In view of this, my Government
has decided to restructure ADMARC so that it becomes viable and deliver on its mandate.


Mr. Speaker, Sir, the country continues to face a number of challenges in the energy sector. These include inadequate capacity to generate electricity and intermittent supply.

Consequently, economic activity in areas such as mining and manufacturing are affected. To address these problems,
my Government is implementing a number of projects.

In the year under review, Government registered the following key achievements:-

continued to implement the Kapichira Hydro-power Project Phase 2.

I am pleased to inform this honourable House that Kapichira Hydro-power Project Phase 2 will
be commissioned in December this year.

It will add 64 Mega Watts to the national grid;

 distributed 2 million free energy saver bulbs across the country which resulted in power savings of up to 45
Mega Watts;

 started installation of a USD 6 million solar power plant that will add 850 Kilo Watts to the national electricity
grid. The project is expected to be commissioned in August this year at Kamuzu International Airport in Lilongwe; and

 Malawi has signed a Memorandum of Understanding with TBEA of China to upgrade the eastern line from Nkula to Bwengu via Salima and Nkhota-kota.

 The feasibility study has been finalised and project works are expected later this year.

In the forthcoming financial year, my Government plans to:-

 implement the three year Coal Fired Power Generation Project whose Memorandum of Understanding has already been signed with China Gezhouba Construction;and

 Electrify 27 rural trading centres by December 2013, under the Malawi Rural Electrification Programme
(MAREP) 7.


Mr. Speaker, Sir, Government’s objective in the Tourism sector is to ensure that Malawi becomes an attractive and competitive tourist destination. The tourism industry has the potential to generate foreign exchange earnings and
create jobs.

It is for this reason that my Government has identified tourism to drive diversification out of agriculture.

Mr. Speaker, Sir,
my Government has therefore intensified campaigns in major international and regional markets of
South Africa, United Kingdom, Germany, Switzerland, Netherlands and China.

In the 2013/2014 Financial Year, Government will:-

 continue to promote private sector participation in the tourism industry by addressing bottlenecks that hinder
private sector entry in the sector;

 finalise the procurement of an operator for the President Hotel, the Bingu wa Mutharika International Conference Centre and Presidential Villas.

This will promote Malawi as a leading destination for conferences tourism. The Operator will give a face lift
to the Presidents Hotel and the Bingu wa Mutharika International Conference Centre by building a modern
village between the hotel and Capital Hill; and a fly over to Sunbird Capital Hotel.

 Introduce tourists cruise vessels on Lake Malawi and Shire River. The project to build vessels has already
started in Monkey Bay. This will create jobs for our people; and

 Construct an ultra-modern Malawi Institute of Tourism campus in Lilongwe. This project seeks to build
capacity in the tourism sector in anticipation of the growing demand.


Mr. Speaker, Sir, the mining sector continued to grow steadily and its contribution to the GDP grew from 3 percent in 2009 to 10 percent in 2012, resulting in a substantial increase in exports.

My Government continued implementing measures aimed at creating a conducive environment that encourages investments in the sector.

Mr. Speaker Sir,
I am pleased to inform the honourable House that during the year under review, Government has:

 Launched the Mines and Minerals Policy in April this year, which will, among other things, guide and promote
sustainable development of the mining sector;

 Reviewed the Mines and Minerals Act which will be tabled in this House before the end of this year;

 Issued exploration licences to investors as one way of encouraging mining activities in the country;

 undertook measures to organize small scale miners into groups and cooperatives in order to promote artisanal and
small scale mining operations in the country;

 started developing a generic Petroleum Sharing Agreement that will be used by all companies wishing to explore oil
and gas in Malawi, and

 Launched airborne geophysical mineral exploration programme to be carried out by Nu-energy Gas of Australia in the (sic) Chikhwawa and Nsanje districts.

Mr. Speaker, Sir,
in the 2013/2014 Fiscal Year, Government will:-

 continue to implement the Mining Growth and Governance Support Project with financial support from the World Bank and European Union;

 introduce training courses in mining in our institutions of higher learning. I am therefore pleased to inform this
honourable House that the Malawi Polytechnic, a constituent college of the University of Malawi, has started developing a curriculum in mining.

I am pleased to announce that the Government of Botswana has offered full scholarships for Malawian students to
study Bachelor of Science degree in Geology and Mining Engineering in Botswana, and

 develop an Artisanal and Small Scale Mining Policy.

Mr. Speaker, Sir,
with the current developments in the mining sector, it is projected that the sector’s contribution to the country’s GDP may rise from 10 percent to over 20 percent in the next five years.

Infrastructure Development

Mr. Speaker, Sir, my Government has made steady progress in the implementation of transport infrastructure projects
that were prioritised in the ERP.

Railway Infrastructure

I am pleased to report to this August House that Construction of the new railway line from Kachaso in T.A. Chapananga in Chikhwawa passing through Mwanza and Neno districts to Nkaya in T.A. Msamala in Balaka which I
officially launched on 6th December 2012 has commenced and progress is already at over 25 percent. The Project is
wholly being financed by Vale and is estimated to cost around USD1 billion. It is expected to be completed by
December 2014.

Regarding the rehabilitation of the 201km Limbe-Makhanga-Bangula-Nsanje-Marka Railway line, I would like to inform
this August House that draft Terms of Reference for Request for Proposals have been developed and consultations are
currently underway to conduct feasibility studies.

Preparatory works for the rehabilitation of the Limbe-Balaka-Salima-Lilongwe-Mchinji section of the Nacala Corridor have been carried out.

Mr. Speaker, Sir, my Government is currently undertaking on-going spot emergency repairs of the existing railway line from Lilongwe to Balaka to ensure usability of the line.

Road Infrastructure

Mr. Speaker Sir, access to transport services is an important determinant of economic growth as it facilitates investments and growth in other sectors such as agriculture, mining, tourism, and manufacturing.

Mr. Speaker, Sir, allow me at this point to outline some of the achievements that we registered in the transport sector during the 2012/2013 financial year.

With regard to road transport, Government continued to implement several projects with support from our
cooperating partners. Some of the notable projects include:

 the commissioning of the 101 km Karonga-Chitipa Road which was inaugurated in January this year;

 the upgrading, to bitumen standard, of 25 km of the Ekwendeni-Ezondweni-Mtwalo Road which was completed and inaugurated in January this year;

 the maintenance and rehabilitation of a 46 km section of the Chikhwawa-Ngabu section of the Chikhwawa-Nsanje Road; and

 the completion and commissioning of a 74 meter long new bridge across South Rukuru River on the M1 road
in Rumphi District.

Mr. Speaker, Sir, Government commenced the construction of Lilongwe Western Bypass whose ground breaking
ceremony took place in January this year.

Mr. Speaker, Sir, I am pleased to report that some of the projects that had stalled due to a number of challenges, including delayed payments and fuel shortages, have resumed.

These include reconstruction and rehabilitation of the Liwonde - Naminga Road and the 60km long Zomba -Blantyre Road.

The Zomba-Blantyre Road project is expected to be completed by March 2014.

Mr. Speaker, Sir, in the coming year, under the ERP road transport sub sector, Government plans to upgrade 9 roads namely Ntcheu- Tsangano-Neno-Mwanza Road, Rumphi-Nyika-Chitipa Road, Lilongwe Old Airport-Kasiya-Santhe Road,
Lirangwe-Chingale-Machinga Road, Mangochi (Chingo)-Malindi-Makanjira road, the Jenda - Edingeni Road; the Chikhwawa-Chapananga-Mwanza Road, the Lirangwe-Changalume-Machinga Road and the Linthipe-Lobi-Mitundu road; as well as the continued rehabilitation and maintenance of the existing road network.

On the Thekerani Road, I am pleased to report that the constructor is already on site.

Mr. Speaker, Sir, I have directed that the 28 graders that are being kept at Private Vehicle Hire Organisation (PVHO) be distributed to each district to develop rural roads in support for agriculture and rural development.

Air Transport

On Air transport, Government plans to boost tourism in the lake shore by constructing a new Mangochi Airport. We are
currently in the process of identifying potential investors for the project.

Mr. Speaker, Sir, Government continued rehabilitation and extension of the Chileka International Airport Terminal Building.

The works are expected to be completed within the first half of the 2013/2014 financial year.

With respect to water transport, I wish to report that rehabilitation of the MV Ilala which had developed serious
defects is almost complete. The ship was withdrawn from service for a comprehensive re-fit and is expected back in
service by end of May 2013.

Private Sector Development, Industry and Trade

Mr. Speaker, Sir, my Government prioritised the private sector as the engine for economic growth and is therefore pivotal to the implementation of the ERP.

In this regard, Government is implementing policies and strategies aimed at promoting a competitive and conducive environment for doing business and economic diversification.

During the year under review Government:-

 Removed restrictive business practices and legal provisions as well as structural constraints in order to improve Malawi’s ranking in the Ease of Doing Business Survey Index from the low position of 157 out of 185 countries in 2013 into the top 100 countries in 2014; and

 continued to build capacity and strengthen the Competition and Fair Trading Commission for the agency to efficiently and effectively ensure fair play in the economy.

Information and Communication Technology

Mr.Speaker, Sir, Information and Communication Technology (ICT) is one of the key pillars that facilitates sustainable economic growth. In this respect, Government prioritized ICT for its recovery programme.

During the year under review, Government commenced the development of a legal framework for the ICT sector and
started preparations for the migration from analogue to digital television broadcasting.

In the 2013/2014 fiscal year, Government plans to:

finalize the Access to Information Policy and Bill;

expand the Government ICT network infrastructure from the Capital City to all the 28 districts;

introduce a central electronic population register and a system for continuous and instant updating of records; and

establish a National Data Centre that will rationalize data storage and data processing facilities.

Youth Development and Empowerment

Mr. Speaker, Sir, youth development and empowerment is critical for socio-economic development of the country.

During the 2012/2013 financial year, Government trained 5,435 young people in vocational and entrepreneurial skills
and provided start-up tools to various vocational technical centres including Katuli in Mangochi, Mpherembe in Mzimba, DAPP Mikolongwe in Chiradzulu, Livingstonia Technical College in Rumphi, Area 25 in Lilongwe, Masache and Bangula in Chikhwawa.

Government is implementing Youth Economic Empowerment Programmes and Projects to enhance their income earning capacity.

I am pleased to report that the construction works under the Integrated Youth Development at Neno have been completed. The center has production units for crop and animal husbandry such as piggery, poultry, bee-keeping and fish farming.


Natural Resources and Environmental Management

Mr. Speaker, Sir, my Government has intensified implementation of measures aimed at integrating climate
change mitigation and adaptation into development planning.

During the period under review, the Government:-

 developed the Environment and Climate Change Communication Strategy (ECCCS) as a way of creating and enhancing public awareness on environment and climate change management issues;

 developed a National Climate Change Investment Plan (NCCIP), which is expected to assist in the mobilization
of investments in the management of climate change in Malawi;

 developed the National Climate Change Policy (NCP);

 introduced a polluter pays principle and banned the use of thin plastics as a demonstration of our commitment towards the promotion of a green growth;

 reviewed the Environmental Management Act (EMA) in order to incorporate emerging issues in environmental management;

 implemented the Public Private Partnership for Sustainable Land Management Project with support from the Global Environment Facility and the United Nations Development Programme (UNDP) in order to reduce land degradation in the Shire River basin; and

 developed Atomic Energy Regulations and approved the establishment of the Atomic Energy Regulatory Authority to oversee the implementation of nuclear programs in mining, medical and industrial applications.

Mr. Speaker, Sir, turning to Forestry Management, I am pleased to report that Government continued implementing
measures aimed at increasing the forest cover. Government, in collaboration with the civil society and the private sector facilitated replanting of a total of 3,700 hectares of industrial timber plantations and signed 211 agreements
with local communities for the co-management of the forest reserves.

In the 2013/2014 Fiscal Year, my Government will:-

 finalize the review of the National Forest Policy, National Forest Act, National Meteorological Policy, National
Meteorological Act and National Climate Change Act;

 continue to address challenges besetting the sector, including deforestation, poor waste management and
pollution; and

 intensify enforcement of compliance with relevant laws and regulations.


Mr. Speaker, Sir, turning to the land sector, my Government remains committed to the provision of land management
services to members of the general public and other stakeholders to ensure that developments in the sector take
place in an orderly and sustainable manner.

In the 2012/2013 financial year, Government made the following achievements in this area:-

 approved the Land Bill, 2012 and 11 other related legal instruments which are currently awaiting enactment
into laws by this august House;

 facilitated the acquisition of Chikwawa Estate in Salima from Press Agriculture Limited for the Green Belt
Initiative; and

 prepared the National Land Use Planning and Management Policy.

Mr. Speaker, Sir, Government also made remarkable progress on the international boundary re-affirmation and
demarcation exercise.

I, therefore, wish to inform this august House that mapping for 399 km of Malawi-Zambia boundary was completed and mapping for the remaining 239 boundary km stretch is underway.

Furthermore, Government completed a joint field reconnaissance survey covering a total of 430 km of a boundary stretch between Malawi and Mozambique in Phalombe, Dedza and Nsanje districts and erected boundary pillars on a stretch covering 152 km in these districts.

Mr. Speaker, Sir, in the coming financial year, Government will continue to sensitise the general public about the Land Bill, 2012 and prepare subsidiary legislation for its implementation and administration. Government will also
adopt the National Land Use Planning and Management Policy.

Employment and Labour

Mr. Speaker, Sir, my Government recognizes that employment and labour are key policy issues for sustainable
economic growth and development.

During the 2012/2013 financial year Government:-

 introduced the South Korean and Dubai Employment Programme for the youth as one way of reducing youth unemployment and build their skills capacity;

 opened offices in South Korea and Dubai to deal with issues of labour, trade and immigration and arrangements are underway to increase capacity at these offices.

The Minister of Labour has already visited South Korea and interviews for the youth have been conducted and visas are being processed.

 developed a National Employment and Labour Policy which places employment as a central macroeconomic and sectoral policy pillar and mainstreams employment and labour issues in all development policies;

 continued to conduct a Labour Force Survey and establish a Labour Market Information System as a basis for assisting government and other stakeholders in employment planning, labour utilization and making evidence-based
employment and labour market interventions; and

 agreed with Trade Unions, under the umbrella of Malawi Congress of Trade Unions to work together to strengthen collective bargaining as a tool for resolving differences and reaching mutual agreements.

Mr. Speaker, Sir, in the coming financial year, Government will develop and implement National Youth Service Program that aims to train and mentor youth on their skills development.

Water Development and Irrigation

Mr. Speaker, Sir, Government recognizes the fundamental role that water development and irrigation play in the
development of this country. To this effect, Government has embraced an integrated approach to water resource
management to properly manage the country’s precious resource and make it readily available for multiple uses such as domestic and industrial water supply, irrigation, tourism and livestock production.

During the 2012/2013 Financial Year, Government continued to implement the National Water Development Programme. In an effort to address the water problems faced in our cities, Government has been working on detailed designs for the construction of new water sources for cities of Lilongwe, Blantyre and Mzuzu.

Government has also finalised the preparatory work for the upgrading of Kamuzu Barrage at Liwonde. The Barrage will be a state-of-the-art facility which will improve regulation of the Lake Malawi-Shire River system, weed management and traffic management.

Mr. Speaker, Sir, in the 2013/2014 financial year, Government will construct a total of six multipurpose dams
across the country and continue to implement the National Water Development Programme and other programmes under the Public Sector Investment Programme.

Mr. Speaker, Sir, with regard to irrigation, Government continued to develop more land for irrigation in order to support agricultural production.

Mr. Speaker, Sir, at the onset of the rainy season in December 2012, a total of 95,637 hectares of land had been developed, with 45,637 hectares under smallholder farmers and 50,000 hectares under estates. Government continued
to implement various irrigation initiatives in collaboration with stakeholders. Among the initiatives being implemented is the Green Belt Initiative (GBI).

In the year under review, Government started to construct 530 hectares of Chikhwawa GBI Scheme in Salima out of the 6,293 hectares that are available. In support of the ERP, 130 hectares of Chikhwawa Scheme was planted with soya beans benefitting 346 households.

It is expected that about 180 metric tons will be produced.

In the forthcoming fiscal year, Government plans to complete the construction of Chikwawa GBI Scheme, and commence the construction of 1,000 hectares of Nthola-llora-Ngosi irrigation Scheme in Karonga.

Housing and Urban Development

Mr. Speaker, Sir, with respect to housing and urban development, Government continued to implement a number of programmes aimed at increasing access to decent, safe and secure shelter.

Government is currently developing a National Housing Policy which is expected to be launched in the first half of
the 2013/2014 Financial Year.

In the year under review, Government commenced the construction of a clinic at Capital Hill which is expected to be completed during the first half of the 2013/2014 Financial Year.

Government also commenced the construction of the new state of the art stadium at Area 48 in Lilongwe which is expected to be completed within 24 months.



Mr. Speaker, Sir, I now turn to public health, HIV and AIDS,Nutrition and Maternal Health and Safe Motherhood

Public Health

With regard to public health, my Government continued to work towards the improvement of quality of life of all Malawians through, among other strategies, increasing access to health facilities and improving the health service
delivery system.

In the year under review, Government, in collaboration with development partners, continued to implement measures
aimed at improving access to Essential Health Package (EHP) through the development of infrastructure.

The health services infrastructure development projects that were implemented during the year included the upgrading of health facilities at districts and central hospitals, the construction of new health centres across the country and
the construction of the state of the art district hospital in Nkhata-Bay.

Government also strengthened the Health transport system in order to improve access to health services through referrals.

To this effect, Government procured 28 ambulances.

Mr. Speaker, Sir, my Government responded quickly to the stock outs of drugs in the public hospitals by offering an emergency tender so that we could have drugs for central hospitals.

Currently, emergency drug kits, containing essential medicines are being distributed to CHAM and public health centres across the country.

Mr. Speaker, Sir, in the 2013/2014 financial year, Government will continue working with our partners to
improve service delivery in the health sector. The DFID has agreed to bring forward 16 million pounds to purchase
essential drugs and medical supplies to enable the Central Medical Stores Trust to have adequate drugs that can be
sold to district hospitals.

Government will also develop a National Health Financing Strategy to guide health sector financing. Furthermore, Mr.
Speaker, Sir, Government will upgrade and build more health centres across the country.

Nutrition, HIV and AIDS Management

Mr. Speaker, Sir,
let me now turn to nutrition, HIV and AIDS management.

In the 2012/2013 financial year, Government achieved the following:-

 over 80,000 acute malnourished under-five children were diagnosed and treated in nutrition rehabilitation
units across the country;

 over 98 percent of children aged 1 - 5 years were de-wormed surpassing the 90 percent target;

 launched a Five Year Nutrition, HIV and AIDS Project which is jointly funded by the World Bank and Canadian International Development Agency,

 rolled out a new regime for ART which has fewer side effects to HIV positive pregnant women and children; and

 intensified awareness of youth friendly sexual and reproductive health and HIV services which resulted in up to 2.9 million visits by the young people to access the services which is almost double the target for the year.

Mr. Speaker, Sir, during the 2013/2014 financial year, Government will lobby for more funding from development
partners for the implementation of nutrition and HIV and AIDS programmes.

Maternal Health and Safe Motherhood

Mr. Speaker, Sir, during the year under review, Government intensified the implementation of maternal and newborn health services to improve quality of care.

The Presidential Initiative on Maternal Health and Safe Motherhood has tremendously contributed to this programme. It is therefore not surprising that as a country, Malawi is making some strides on maternal and child health indicators.

New data from the United Nations Estimates (2012) shows that Malawi’s maternal mortality is at 460 per 100,000 live births down from 675 per 100,000 live births in 2010.

Much as this is a welcome development, my government strongly believes that the fight is far from being won.

Mr. Speaker, Sir, the establishment of the Chiefs’ Committees also helped in sensitising communities on sexual
reproductive health services and encouraged pregnant women to seek services at hospitals.

Furthermore, through the initiative, Government is constructing maternity waiting homes across the country.

Construction of a maternity waiting home has since been completed and opened at Mulanje District Hospital. The
shelter at Dowa Hospital is completed and ready for opening.

Currently, maternity waiting homes at Ulongwe in Balaka,Chilumba in Karonga, Mkanda in Mchinji, Lumbadzi in Dowa, Malosa in Zomba, Lungwena in Mangochi, and a maternity unit in Senior Chief Kwataine’s area in Ntcheu are at various stages of construction.

Mr. Speaker, Sir, currently, 200 young women, from 20 districts across the country have been recruited through
their Chiefs for an 18 months community midwifery training program. Upon graduation, the community midwives will be
bonded and work for their respective communities for five years.

The aim is to ensure that mothers do not travel long distances to seek maternal health care services thereby averting possible pregnancy complications.

In the coming financial year, Government will allocate enough resources to ensure that these efforts are sustained
so that our mothers should not die while giving birth.

Education, Science and Technology

Mr. Speaker, Sir, Education Science and Technology empowers people by providing them with the relevant
knowledge, skills, expertise and competencies.

To this end, Government is determined to increase access to quality education at primary, secondary and tertiary levels.

Mr. Speaker, Sir, Government has adopted a Sector Wide Approach to properly plan, implement and monitor
developments in the sector.

During the 2012/2013 financial year, Government has registered the following achievements:-

commenced the process of promoting about 11,500 primary school teachers; over 2,000 secondary school teachers and 65 teacher training college tutors;

continued with infrastructure development in order to increase access to and improve quality of education at all levels;

 commenced the review of secondary school curriculum to promote relevance and quality of education; and

 supported 12,000 secondary students with bursaries.

In the 2013/2014 financial year, Government will train and upgrade more teachers at all levels. For instance, our aim is to attain a primary Pupil to Qualified Teacher ratio of 60 to 1 by 2017/2018, down from the current 74 to 1 ratio.

Mr. Speaker, Sir, to support deserving students who need financial support, my Government will bring before this
august House during this sitting a Higher Education Students’ Loan Bill.

This Bill will institutionalise the framework for students’ loans. The loans will cover students in both public and private universities.

Early Childhood Development and Child Protection

Mr. Speaker, Sir, my Government recognizes that investing in early childhood development programmes guarantees
high quality future human capital and productivity.

Children also need special protection so that they grow into productive and responsible citizens.

In the year under review, Government trained 240 District Civil Protection Committees from 16 districts affected by
food shortage and floods.

The Committees have been empowered to monitor human rights violation. They will also provide basic child social services including psycho-social support, early childhood development and general child rights education to the affected communities. Government is developing a Child Protection Management Information System to strengthen the provision of child protection services in the country.

In the 2013/14 financial year, Government will implement a comprehensive strategy of removing children from the

Gender and Development

Mr. Speaker, Sir, gender parity, women empowerment and uplifting of women’s rights are prerequisites to poverty
reduction and sustainable development.

Recently, I launched the Malawi Millennium Development Goals (MDG) Acceleration Framework and Country Action Plan aimed at accelerating progress towards the attainment of the MDG number 3 on Gender Equality and Women Empowerment.

Government also launched a White Paper for strengthening the National Gender Machinery in Malawi. The White Paper
provides a roadmap to enable the country to move even faster in promoting gender equality, equity and women’s

Mr. Speaker, Sir, I am pleased to report that I have promoted more than 100 women to decision making
positions. These include:

Nine ministers and deputy ministers;

the Chief Secretary to the Government,

The Acting Chief Justice,

Two deputy Reserve Bank Governors,

The Solicitor General,

The Deputy Inspector General of Police,

18 principal secretaries and other heads of government departments.

Mr. Speaker, Sir, in view of the 2014 tripartite elections, my Government hosted a National Conference on Women in Politics which focused on providing measures to be adopted and implemented by political parties to enable increased number of women in effective political participation.

In the 2013/2014 financial year, Government will intensify activities that promote the participation of women in politics with the objective of increasing the number of women parliamentarians from the current 22 percent to 50 percent and women Councillors from 9 percent in 2000 to 50 percent in 2014.

Social Support and Disaster Risk Management

Mr. Speaker, Sir, turning to social support and disaster risk Management, I wish to inform this august House that Government is determined to improve the rights and welfare of the vulnerable and households affected by different forms of disaster.

Persons with Disabilities and the Elderly

Mr. Speaker, Sir, with regard to persons with disabilities, you will recall that this august House passed a Disability Bill that is aimed at protecting the rights and improving the living standards of persons with disabilities.

I am pleased to inform this august House that I directed the Ministry of Finance to allocate 30 percent of my salary to the Ministry of Disability and Elderly Affairs to help them improve MACOHA’s service delivery.

Mr. Speaker, Sir, during the 2012/2013 Financial Year, Government:

 trained 200 persons with disabilities in vocational skills and other professional skills through Community-Based Rehabilitation Programme in the districts of Phalombe, Lilongwe, Machinga, Mzimba, Blantyre and Salima;

 supported 15 deserving students with disabilities through the education sponsorship programme; and

 introduced sign Language Interpretation on MBC TV with the aim of giving access to information to
persons with hearing impairment.

Mr. Speaker, Sir, with regard to the elderly, Government, among other things, supported Community Based Organizations with 1,650 iron sheets for construction and renovation of houses of the elderly and care centers in Chitipa, Karonga, Mchinji, Lilongwe, Zomba, Neno and Nsanje districts.

In the 2013/2014 financial year, Government will inter alia provide low cost housing to 50 older persons and other
vulnerable people and roll out Community Based Rehabilitation Programme in Kasungu, Mulanje and Karonga districts.

Disaster Risk Management

Mr. Speaker, Sir, our country continues to face disasters that disrupt people’s livelihoods; endanger human lives and food security; and damage infrastructure such as houses, roads and bridges.

In the year under review about 60,000 households were affected by floods, stormy rains and strong winds. Of the affected households, about 33,000 had their houses and properties damaged while 26,000 had their crops in the field damaged.

Mr. Speaker, Sir, in response to these disasters, Government distributed various relief items to destitute people across the country.

Currently, Government and other stakeholders are distributing agricultural inputs to affected households with
access to wetlands so that they should engage in irrigation farming.

Mr. Speaker, Sir, the report by the Malawi Vulnerability Assessment Committee in the year under review indicates that 1.9 million people were food insecure.

Government through the Humanitarian Response Programme distributed relief food items to the affected households.

To ensure proper and well coordinated responses to disasters, Government launched, in February this year, the
National Platform for Disaster Risk Management aimed at bringing together all stakeholders involved in the disaster
risk management. Government is also implementing and coordinating a number of disaster risk reduction programmes and projects aimed at mitigating the impact of disasters, including the multi-million dollar Shire River Basin Management Programme.

Local Government

Mr. Speaker, Sir, Local Government and Rural Development is key to promoting local governance and participatory
democracy by creating an enabling environment for socio-economic development.

In this sector, my Government is focusing on the following areas:

Chief’s Administration:
Mr Speaker Sir, Government is committed to continue improving the welfare of chiefs through among other things
providing houses and offices. In this regard, Government completed the construction of a house for Paramount Chief
Lundu in Chikhwawa which will soon be handed over.

Meanwhile, construction of houses for T/A Malemia in Nsanje and Senior Chief Tsabango in Lilongwe are at an advanced stage. Preparatory works for the construction of a house for Senior Chief Mbwana at Usisya in Nkhata-Bay is underway.

Mr. Speaker, Sir,
my Government has noted that of the 62,000 Group Village Heads and Village Heads in the
country, only 22,000 are officially registered.

In this regard, my Government has decided to bring onto the official register 20,000 chiefs broken down as follows: 15,000 Village Heads and 5,000 Group Village Heads.

The District Commissioners will manage the exercise to identify those chiefs that will be upgraded to the official register.

Mr. Speaker Sir, In order to facilitate efficient operations of Chief’s Administration, Government initiated the review of the Chief’s Act.

The review process has currently undergone a series of consultations throughout the country.


Mr. Speaker Sir, I am pleased to report that Government intends to continue supporting communities particularly in rural areas with various socio-economic services.

As this august House may be aware, the Malawi Social Action Fund (MASAF) project has been one of the flagship projects for implementing such interventions in Malawi for many years now.

Mr Speaker Sir, funding for the MASAF 4 project which finances most of the community development projects is
coming to an end this year and as government, we have already started engaging the World Bank for assistance to
finance the MASAF 5.

Meanwhile, the World Bank sent a Project Identification Mission which was in the country from 18th March 2013 to 5th
April 2013. The Mission discussed with the Government the potential support.

Construction of Rural and Urban Markets:

Mr. Speaker Sir, during the 2012/2013 financial year, Government completed construction of modern markets at
Matawale in Zomba City, Dwangwa in Nkhotakota, Mangochi boma in Mangochi, Thyolo Boma in Thyolo,Nkhamenya in Kasungu, Limbuli in Mulanje and Ekwendeni in Mzimba districts.

Mr. Speaker, Sir, the following markets are at various stages of construction: Bvumbwe in Thyolo and Enukweni in Mzimba. Regarding Nsanje, Tsangano and Lizulu markets, construction works will start later this year.

Construction of Rural Growth Centres:

Mr. Speaker Sir, under this Programme, Government has completed construction of basic social infrastructure at
Neno and Nthalire Rural Growth Centers in Neno and Chitipa.

The two centers are ready for hand over to the Councils. The construction of Nambuma Rural Growth Centre in Dowa district is expected to be completed in June this year.

With regard to the second phase of the Rural Growth Centres, Government embarked on construction works at Chitekesa in Phalombe, Chapananga in Chikhwawa and Mkanda in Mchinji districts. The first phase of construction works at Chitekesa which includes construction of the market, bus depot and community ground is almost complete whilst the first phase of construction works at Mkanda and Chapananga Rural Growth Centers which include construction of the market and the bus depots are completed.

Mr. Speaker Sir, Government is committed to ensure that the Rural Growth Centers are contributing to the growth of rural economy.

In this vein Government is expected to complete the second phase of Rural Growth Centres construction during the 2013/2014 fiscal year.


Mr. Speaker, Sir, good governance is a prerequisite to this country’s socio-economic development. To this end,
Government is committed to promote good economic, corporate, democratic and public sector governance as well as stamping out corruption and maintaining sound international relations.

Human Rights

Mr. Speaker, Sir, I am pleased to report that the country’s human rights record has tremendously improved from the time my administration took over the reigns of power.

Mr. Speaker, Sir, for the first time, Malawi sent a delegation to attend the 53rd session of the African Commission on Human and Peoples’ Rights which was held in Banjul Gambia in April, 2013.

This marks Malawi’s re-engagement with the African Commission. Malawi has also completed her first ever state party report under the African Charter on Human and People’s Rights. This report will be debated by the African Commission at its 54th session in October this year.

Mr. Speaker, Sir, in addition to this, Government has embarked on an ambitious program to clear a backlog of
various state party reports which are pending before the United Nations Human Rights system and the African Union
Rights system.

The reports to be presented within the next financial year include – the International Covenant Against
Torture; and the Protocol to the African Charter on Human and Peoples’ rights on the Rights of Women.

Tripartite Elections

Mr. Speaker, Sir,
Malawi will, for the first time, hold Tripartite Elections in May, 2014. This is an important
milestone for our country because Malawians will have the opportunity to elect a President, Member of Parliament and
a Councillor at the same time.

Mr. Speaker, Sir,
as you may be aware, Malawians have, since the year 2000, been denied their constitutional and
democratic right to choose a representative at local government level. The holding of the Tripartite Elections is,
therefore, a clear demonstration of my Government’s commitment to uphold our country’s constitutional and democratic principles.

Mr. Speaker, Sir, I wish to assure the nation that my Government will support the electoral process to ensure
free, fair and credible elections.

I, therefore, urge Honourable Members to support Bills which will shortly be presented in this august House to facilitate the holding of the Tripartite Elections.

Mr. Speaker, Sir, I am pleased to inform this august House that the Malawi Electoral Commission has since completed the process of ward demarcation in all districts and city councils.

Mr. Speaker, Sir, the Tripartite Elections will be funded by Government and our Development Partners. I would like to request our Development Partners to support us in providing the much needed resources to the Malawi Electoral Commission to ensure that the elections are free, fair and credible.

I also call upon Civil Society Organisations to provide the required civic education to our citizens.

The Fight Against Corruption

Mr. Speaker, Sir, my Government’s stance in the fight against corruption remains steadfast. It is for this reason, that my Government has introduced a number of measures to fight corruption.

Mr. Speaker, Sir, let me put on record that my Government will not condone corrupt practices at any level.

Anyone caught in corrupt acts will face the full force of the law.

Mr. Speaker, Sir,
during the period under review, the Anti-Corruption Bureau concluded 418 corruption investigations and commenced 74 new prosecutions.

A total of 34 prosecutions were completed resulting in 9 convictions, and 2 acquittals. Judgements are being awaited on the remaining 23 cases.

Mr. Speaker, Sir,
in the past there has been gross negligence in the implementation of corrective measures to improve financial prudence leading to massive losses of public funds meant for national development.

The Auditor General’s Report for the financial year ended June 2011 for instance, states that about MK3 billion meant for national development was lost through financial mismanagement.

Mr. Speaker, Sir, fiscal discipline is at the heart of this Government. In this regard, Government will fast track the implementation of corrective measures as recommended by Internal Audit Reports, Procurement Audit Reports and Auditor General’s Reports.

Mr. Speaker, Sir, time when these reports were ignored is long gone. Responsible officers will be made accountable on the findings of these reports.

Government will also roll out the updated 2013 Treasury Instructions as one way of combating financial misappropriation in the 2013/2014 Financial Year.

My Office shall provide overall over sight of these measures through Organizational Performance Agreements with public
institutions. We need to build and bring back the culture of fiscal discipline in the public service by ensuring compliance with our economic governance laws, provisions, regulations, rules and best practices.

Peace and Security

Mr. Speaker, Sir, my Government attaches great importance to issues of national security, including security of people’s life and their property. I am, therefore, happy to report that during the 2012/2013 Financial Year, the country’s overall security situation continued to improve.

The Malawi Police Service continued employing a number of professional strategies in ensuring peace and tranquillity in the country.

Mr. Speaker, Sir, in order to reduce congestion in our prisons my Government will continue to construct new
prisons in the country.

Currently, construction of Lilongwe maximum prison is underway.

Public Sector Reforms

Mr. Speaker, Sir, in order to respond to demands for high quality service in the public sector, Government continued to implement reforms aimed at enhancing accountability, transparency and efficiency in public service delivery.

Mr. Speaker, Sir, in the 2012/2013 Financial Year, Government:-

 started the process of developing the Public Service Management Policy framework and revising the Public Service Act (1994);

 continued to promote Public Service Delivery accountability through Service Charters;

 completed the merger of a number of parastatals including SEDOM, MEDI and DEMAT which were merged to form Small and Medium Entrepreneurs Development Institute (SMEDI) through a Trust Deed; and

 introduced an Organisational Performance Assessment System in the public service to monitor and evaluate
performance in ministries, departments and agencies.

Mr. Speaker, Sir, an efficient Public Service is important in the execution of Government development agenda.

In this regard, my Government will make deliberate efforts to ensure that the Public Service is incentivized within
the limited resources to provide quality services.

Mr. Speaker, Sir, Government will in the next financial year effect salary increase to the Public Service. The
salary increase will include an increase of the Honoraria that we give to our Traditional Leaders. The increase will
take into consideration the medium term remuneration package to ensure that salaries are reviewed regularly.

My Government will be tabling the Public Service Remuneration Board Bill to address this and also to address
the problem of irregularities in the pay scales.

I have also directed that Government examines critically the problems of non-promotions of high performing officials so that we create an environment conducive to high performance.

International Relations

Mr. Speaker, Sir, my Government recognizes the importance of good bilateral and multilateral relations with our
neighbours and all other Governments and agencies with whom we have relations.

It is for this reason that my Government has worked hard to restore and improve our bilateral relations with the international community as well as with our neighbouring countries.

I am pleased to report that the Government of Brazil is in the process of opening a resident mission in Lilongwe. My
Government has also reopened its resident mission in Nairobi, Kenya. These missions will help to facilitate trade
and investment opportunities between Malawi and the two countries.

Mr. Speaker, Sir, my Government is also finalizing the process of opening of a consulate in Tete in Mozambique to facilitate trade and investment linkages between our two countries.

Mr. Speaker, Sir, Malawi will be taking over as Chair of the Southern African Development Community when we host the 33rd Ordinary session in August, 2013.

My Government has already started making necessary preparations for hosting the Summit.


Mr. Speaker Sir, the 2010 Integrated Household Survey showed that the poverty head count in Malawi did not
significantly decrease over the past ten years. Statistics show that in 2004/2005 poverty head count was at 52.4
percent and in 2010/2011 it had only dropped to 50.7 percent.

The government is concerned by the slow pace of eradicating poverty and therefore government is determined to rejuvenate rural economies, improve the social economic conditions of rural communities and bring real incomes into

Against this concern of deep levels of poverty in most rural Malawi, I have decided that for the first time, the
Government will specifically target the individual villages across the country with comprehensive high impact
interventions that will accelerate the betterment of well being of rural and urban poor.

In this regard, I am pleased to announce to this august House that I will set up the Mudzi Transformation Trust, whose objective will be to mobilise accessible, responsive and flexible resources to support social and economic projects for the transformation of the lives of Malawians in all 29 districts.

Mr. Speaker, Sir, as earlier stated, Government will formalize the registration of 20,000 village heads as the
Trust will work with these village heads to mobilize communities for implementation of the programme.

Mr. Speaker Sir, the Mudzi Transformation Trust will be a private sector led initiative to which both local and
international private sector is invited to invest in.

I must say, the past year has given me valuable experience on how keen, effective and responsive the private sector has been in supporting community development programs.

The private sector organizations are looking at their participation in development programs in Malawi from both a business and a corporate social responsibility perspective.

Therefore, I am pleased to inform the House that the Trust will be an opportunity for partnership with Private Sector for the transformation of Malawi.

Mr. Speaker Sir, my vision is that the Trust will support villages to access social and economic services that address most of their basic needs.

The package of interventions will among other things include the following:

1. Provision of clean and potable water;

2. Building assets of households;

3. Support farmers clubs access farm inputs on loans;

4. Support rural farmers grow cash crops;

5. Facilitate access to markets;

6. Provide support for roads, health and education infrastructure development;

7. Provide support for the development of cottage industries; and

8. Provide special housing schemes for serving low grade civil servants, for example, health workers, teachers,
community and extension workers, police men and women.

Mr. Speaker Sir, the Mudzi Transformation Trust will compliment all other existing development programs that
the Government is currently implementing.

It is a vehicle for the acceleration of Malawi’s attainment of internationally accepted standards for human development.

Mr. Speaker Sir, I wish to further inform the honourable House that I will launch the Mudzi Transformation Fund
later this year. It is my hope that all Malawians of goodwill will join me in this journey to eradicate poverty in our

Mr. Speaker, Sir, in my address to this August House last year, I had said, “I also have a dream”. That dream still lives on:

I see Information Communication Technology lowering the cost of delivery of services and unlocking economic
opportunities for communities. I see vocational education for the youth expanding income opportunities for youth. I see health and economic opportunities empowering our citizens for healthier, productive and smaller families. I see our economy being transformed.

Yes, Mr. Speaker, Sir, I see in today’s newspapers Kwacha trading at K347 to the dollar down from K422. Indeed I continue to see prosperity upon our land. Yes, Mr. Speaker, Sir, this country has a future.

Mr. Speaker, Sir, yes, this journey to realise our dream lives on. Indeed, I see our lower grade civil servants who have been left out for a long time getting an opportunity to own a decent home of their own.

I see our rural communities properly organised with modern villages.

I see cottage industries established in our rural communities to create jobs for our rural population. I see our villages being transformed. I see a Malawi on the road to transformation.

Mr. Speaker Sir, I wish to reaffirm my Government’s commitment to deepening our democracy; strengthening the
rule of law, and safeguarding Malawi’s impeccable standing in the international community.

I further commit my Government to protect press freedom, nurture the independence of the three arms of government
and continue with the reforms until we realize full economic transformation.

Finally, Mr. Speaker, Sir, allow me to express my personal gratitude and that of my Government to all Malawians for their sacrifices and the confidence entrusted in me and my government during this period of recovery.

The road to recovery has not been easy. Nonetheless, let me reassure this august House and all Malawians that our economy is now turning around.

Our country is attractive again to both local and foreign investors. There is a bright future for our nation. To God be the glory.

Let me at this point, Mr. Speaker, Sir, pay special tribute to our Development and Cooperating Partners for the support that they have rendered to our country.

I would also like to express gratitude to you, Mr. Speaker, Sir, and all Honourable Members for your continued support to my administration.

Mr. Speaker, Sir, it is now my singular honour to declare the 2013/2014 Budget Meeting of the 44th Session of Parliament officially opened.

May the Almighty God bless Malawi.
Thank you, Mr. Speaker, Sir.