Budget in k371.8bn quarterly deficit
The K5.98 trillion 2024/25 National Budget has recorded a K371.8 billion deficit in the first quarter (Q1) of this fiscal year, with economists projecting that the planned K1.4 trillion annual deficit will likely rise.
Total revenues for the quarter covering the period April 1 to June 30 stood at K1.1 trillion while expenditures were recorded at K1.47 trillion, according to the Reserve Bank of Malawi (RBM) Monthly Economic Review for June 2024.
The report further indicates that the budget deficit for April, the first month of this fiscal year, stood at K106.1 billion. It then went up to K156.8 billion in May and thereafter dropped to K108.9 billion in June, respectively.
RBM has attributed the rise in budget deficit to a sharp decline in grants and a 28 percent drop of non-tax revenue.
Reads the report in part: “Total revenues decreased by K137.4 billion to K250.4 billion in June 2024 from K390.5 billion in the preceding month.
“The decrease was driven by a K147.9 billion decline in grants to K45.2 billion and a K2.7 billion decline in non-tax revenues to K6.9 billion.”
During the quarter, tax revenues accumulated to K658.6 billion, missing the target of K748.1 billion by 12 percent as Malawi Revenue Authority collected K272.3 billion in April, K187.4 billion in May and K198.4 billion in June, according to the report.
Commenting on the revenue performance on Friday, Economics Association of Malawi acting president Bertha Bangara Chikadza described the quarterly deficit as a concern, saying government’s fiscal pressure mainly heightens in the coming quarters of the economic lean period.
“It would be reasonable to expect that the quarterly deficit should have been lower if the government was to achieve the planned deficit for the year,” she said.
Bangara-Chikadza said the current situation underscores the challenges government is facing to fulfil its mandate effectively.
In a separate interview, Mzuzu University economics lecturer Christopher Mbukwa said if budget deficits are not controlled, the anticipated K1.4 trillion annual deficit will shoot up and further worsen the country’s debt situation.
“If the quarterly deficits persist, we are likely to spend above the annual borrowing target of 1.4 trillion. This will be a significant addition to an already unsustainable public debt.
Economist Lesley Mkandawire said the quarterly deficit is a red flag and if it continues in the second quarter, it would require downward revision of the fiscal plan.
In its Malawi Economic Monitor, the World Bank warned that most sub-Saharan African countries, including Malawi, will face budget deficits due to production deficiency.
