The 2023/24 National Budget posted a deficit of K1.05 trillion as expenditures recorded at K3.7 trillion surpassed revenues at K2.72 trillion, data from the Reserve Bank of Malawi (RBM) shows.
The figure is lower than K1.2 trillion projected deficit for the 2023/24 fiscal year, but higher than K884 billion deficit recorded in the previous financial year.
Data contained in latest RBM Financial and Economic Review indicates that government operations recorded a deficit of K376.9 billion, K295.9 billion, K160.9 billion, and K221.9 billion in first, second, third and fourth-quarters, respectively.
Reads the report in part: “Total revenue collections for the fourth quarter of 2023 stood at K734 billion. This represents a 13.4 percent increase from a total of K647.3 billion mobilised during the preceding quarter.
“Total government expenditures decreased by 10.7 percent to K894.9 billion during the quarter. The development followed a 60.3 percent decline in development expenditures to K87.7 billion while recurrent expenditures increased by 3.3 percent to K807.2 billion.”
In an interview, Economics Association of Malawi (Ecama) Acting President Bertha Bangara-Chikadza has however stressed that the deficits are likely to maintain elevated—expecting it to worsen 2024/25 fiscal year due to Elnino induced expenditure obligations including safety nets handouts.
Chikadza said: “From what we are seeing, the country will not improve on current deficits, if anything the deficits might slightly increase this year considering that we faced Elnino and the government is providing safety nets to both the rural and urban dwellers.
“On top of that, the country is still rebuilding after facing the devastating cyclone Freddy and this means more money over and above the allocations in the budget.
“And this is a campaign year, considering that next year we will have elections and obviously there will be more spending. So as Ecama, looking at all these and more, we believe the deficit will not improve but rather it is projected to increase.”
In a separate interview, Institute of Chartered Accountants in Malawi President Moffat Ngalande observed that the 2023/24 deficit is slightly below projection due to improved and commendable revenue generation capacity despite increasing expenditures.
Ngalande has, however, described the figure as absolutely big and needs special interest from authorities to control expenditure and ensure the accumulated debts to fill the deficit are well utilized to spur production.
“The utility and application of that debt also helps to propel or slow down growth. If invested in infrastructure and other revenue generating or facilitating projects, this mitigates fiscal pressure due to increasing revenues. If spent on consumption alone, then we have an unnecessary debt burden for future generations.
“Government should ensure that it borrows responsibly, for productivity and not consumption alone and all borrowing should not exceed the thresholds, otherwise the quantum of amounts will continue to grow in time due to inflation and growing populations and economic activity which is usual,” Ngalande said.
Secretary to Treasury Betchani Tchereni was not available for comment but he is on record having stressed that starting the fiscal year 2024/25, government’s domestic borrowing is targeting production.
The 2024/2025 fiscal year’s overall balance is estimated at a deficit of K1.43 trillion, which is 7.6 percent of the GDP. This deficit will be financed through domestic borrowing amounting to K1.28 trillion and K150 billion foreign borrowing.
