Budget in K156bn deficit in Q1—RBM
The Ministry of Finance and Economic Affairs has opened the 2024/25 fiscal year with a K156.8 billion deficit, published Reserve Bank of Malawi (RBM) data indicates.
This is an increase from deficit of K69.1 billion and K95.2 billion recorded in the preceding month and corresponding period of 2023, respectively.
In its April 2024 Monthly Economic Report published on Thursday, RBM said this follows a rise in government expenditures by K297.1 billion to K620.4 billion during the month under review, a jump from K323.3 billion the previous month.
Reads the report in part: “This increase followed a K179.9 billion rise in recurrent expenditures to K419.2 billion stemming primarily from a K140.6 billion rise in salary expenditure to K166.2 billion and a K15.6 billion rise in interest payments to K126.4 billion.
“Development expenditures also increased by K117.2 billion to K201.1 billion during the period under review.”
During the same period, a rise in total revenues by K209.3 billion to K463.5 billion during the month under review from K254.3 billion in the previous month failed to narrow the deficit gap, data shows.
According to the data, the increase in revenue was driven by a K105.7 billion rise in tax revenues to K272.3 billion, an K8.9 billion rise in non-tax revenues to K19.0 billion and a K94.8 billion rise in grants to K172.3 billion during the month under review.
Meanwhile, government has brought down the deficit projection for the financial year as a percentage of gross domestic product (GDP) by 0.9 percentage point from 8.5 percent to 7.6 percent. This means that in nominal terms, the deficit has grown from K1.36 trillion to K1.43 trillion.
Total revenue and grants, on the other hand, are estimated at K4.55 trillion, representing 24.3 percent of GDP while domestic revenues are estimated at K3.38 trillion, representing 18.1 percent of GDP, of which tax revenues are estimated at K3.26 trillion while other revenues have been projected at K126.54 billion.
Minister of Finance and Economic Affairs Simplex Chithyola Banda in an interview expressed confidence that the measures the government has undertaken under the Domestic Revenue Mobilisation Strategy will boost revenue collection through improved and efficient tax collection systems such as use of tax stamps and improved compliance to value-added tax.
On the widening budget deficit, he said the government has brought down the deficit as a percentage of GDP by 0.9 percentage point from 8.5 percent to 7.6 percent. In nominal terms, the deficit has grown from K1.36 trillion to K1.43 trillion.
Lilongwe University of Agriculture and Natural Resources agricultural economist Christopher Mbukwa said he expects the deficit at the end of the financial year to be within range. Domestic Revenue Mobilisation Strategy, launched in 2021, seeks to increase Malawi’s domestic revenue as a share of GDP by five percentage points from 14 percent to 19 percent in 2026 by broadening the tax base, improving tax compliance and improving the perception of the tax system, among other tactics.
