Covid-19 worsens Fiscal pressure

Pressure is mounting on fiscal authorities following Treasury’s unplanned expenditure in the face of coronavirus pandemic amid poor revenue performance, analysts have said.

On Friday, President Peter Mutharika joined countries worldwide to declare a State of Disaster and announced setting aside a K15 billion fund to deal with the disease. 

This, however, falls short of the unforeseen expenditure allocation of K2 billion in the 2019/20 National Budget, which means government has to source an extra K13 billion to cover the shortfall.

In an interview with Business News on Monday, Treasury spokesperson Davis Sado admitted that unforeseen expenditure may not cater for everything, but said since the country is  two months away from end of financial year, some of the coronavirus related expenditures may be pushed to the next fiscal calender whose fiscal framework is being finalised.

Said Sado: “Of course, adjustments may have to be undertaken, but this will not disturb the operations of ministries, departments and agencies [MDAs] since there are only two months to go.

“Treasury will strive to balance the expenditures by end of fiscal year. We are closely monitoring the situation and preparing ourselves so that we should not slip away from the economic gains we have made so far.”.

Treasury is already under pressure following continued budget deficits with  central government budgetary operations for the first-half of this financial year closing with a deficit of K165.7 billion.

 At K165.7 billion, the half-year deficit of the 2019/20 financial year meant Treasury surpassed the earlier set deficit target of K155.9 billion by K9.8 billion. 

 On the other hand, political pressure to protect subsidies and public sector workers’ wages is seen to have kept spending high in the first half of the 2019/2020 financial year.

 This, coupled with the fresh presidential election mid this year is also projected to keep spending elevated, ultimately straining the fiscal balance.

 Chancellor College economics professor Ben Kaluwa described the coronavirus pandemic as the single biggest issue as it can cripple the economy through massive business disruption.

He said: “We cannot spend and have enough to counter this.

“The fact remains that we will be constrained given our small resource envelope.”

Economics Association of Malawi (Ecama) president Lauryn Nyasulu said business disruptions trickles down to revenue collection as there would be a decline in trade as such, taxes and other business related taxes will be minimal.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI)  chief executive officer Chancellor Kaferapanjira indicated that the fact that local businesses are not spared from the coronavirus is a strain on the economy. 

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