The Economics Association of Malawi (Ecama) has urged Treasury to adopt stricter fiscal measures and prioritise essential expenditures to avert further economic strain in the face of a widening fiscal deficit.
The call comes as the government begins the second half of the 2024/25 fiscal year with a K231 billion deficit.
According to the Reserve Bank of Malawi’s October 2024 Monthly Economic Review, government revenues rose significantly to K361 billion, an increase of K61.2 billion compared to the previous month.
This growth was primarily driven by a 33.6 percent surge in tax revenues, which contributed K75.3 billion.
However, this revenue increase was overshadowed by a sharp decline in non-tax revenues, which fell by 56.8 percent (K11.7 billion), and a reduction in grants by 4.5 percent (K2.5 billion).
Meanwhile, government expenditures soared to K574.1 billion in October 2024, marking a substantial 27.8 percent increase. Recurrent expenditures accounted for K449.8 billion, rising by 29.3 percent, while development expenditures ws allocated K124.3 billion, up by 22.3 percent.
The surge in expenditures has widened the fiscal gap to K213.1 billion in October— significantly higher than the K149.7 billion deficit recorded in September and a stark contrast to the K46.4 billion surplus during the same period in 2023.
Cumulatively, Malawi has recorded a K909.9 billion fiscal deficit in the 2024/25 financial year, as total expenditures (K3.5 trillion) continue to exceed revenues (K2.6 trillion).
Ecama president Bertha Bangara-Chikadza said government needs to evaluate all expenditures to identify and prioritise essential recurrent expenditures and critical development projects.
Bangara-Chikadza, who is also an economics lecturer at the University of Malawi, urged authorities to broaden the tax base and formalise informal businesses to enhance tax collection efforts.
In a WhatsApp response, she highlighted the recurring issue of grant underperformance in the national budget.
She said: “As a country, we should also be realistic about our grants projections in every financial year because underperformance of grants seems to be an annual occurrence.”
“This means we should plan with the expectation of receiving little or no grants at all. This way, we will budget based on available resources and perform better.”
In an earlier interview, Budget and Finance Committee of Parliament chairperson Gladys Ganda urged the Malawi Revenue Authority to fast-track a World Bank-supported Fiscal Governance Programme for Results, to create an alternative revenue stream.
She said: “We implore the MRA to press on with the programme.
“Boosting revenue will ease pressure on the fiscus and help contain deficits in the long run.”
