Fiscal plan in K15.5bn surplus
The 2016/17 National Budget achieved a K15.5 billion surplus in July, the first month of this fiscal year, a latest report has shown.
This is a turnaround from a deficit of K18.4 billion in June and the preceding months.
In its monthly economic review, the Reserve Bank of Malawi (RBM) said the surplus-an increase in revenue over expenditure-was a result of reduced expenditures during the month under review, a feat Treasury spokesperson Nations Msowoya said yesterday is due to fiscal prudence.
The report shows that total government revenue in the month amounted to K75.4 billion against expenditures of K59.9 billion, representing a 0.4 percent of nominal gross domestic product (GDP) currently at K4.2 trillion.
Msowoya said government has strived to exercise prudence in government expenditure, stressing that management of expenditure was executed well during and before the review period.
He said: “Towards the end of the last financial year, though we were given permission by International Monetary Fund [IMF] to borrow up to K20 billion, we only borrowed somewhere around K2 billion.
“We have had our ministries complaining about funding, but at the end of the day, the fiscal objective was achieved. We have also demonstrated a fine performance under the Extended Credit Facility [ECF]”.
The three-year ECF is a lending arrangement by IMF that provides sustained programme engagement over the medium to long-term in case of protracted balance of payments (BoP) problems.
In Malawi, the arrangement, which was approved on July 23 2012, is equivalent to $144.4 million (about K105 billion, at the current exchange rate.)
It remains to be seen if the momentum achieved is being sustained, but University of Malawi’s (Unima) Chancellor College economics professor Ben Kaluwa yesterday advised government not to relax but ensure that it does not waver on the direction it has taken.
“We have the scale of biting the bullet (making tough decisions) and it seems government has taken this direction. Going forward, government needs to consider the zero-based budgeting where it should cease to worry about historical things it used to spend money on.
“Government has expressed plans to review its appetite for expenditure. This is a very good approach and we are hoping to see it implementing this,” he said.
In the 2016/17 budget, Minister of Finance, Economic Planning and Development Goodall Gondwe said while the fiscal plan seeks to sustain efforts to achieve macroeconomic stability, it also allows for a level of borrowing that allows government to respond to El Nino induced food insecurity.
In view of this, he said year-end net domestic financing in 2016/17 is set at K60 billion, compared with the lower limit of K25 billion in the previous fiscal year.
He said the lower limit for the current fiscal year has also been relaxed to finance immediate food purchases. n
