Economists caution on fiscal deficit
Economists have asked government to align its expenditure to resource availability.
The caution comes in the wake of a widened fiscal deficit in July, which is also the first month of the 2017/18 financial year.
According to the published Reserve Bank of Malawi July 2017 Monthly Economic Report, central government budgetary operations July 2017 culminated into a deficit of K28.3 billion following a deficit of K1.3 billion recorded in the preceding month.
This was a contrast from a surplus of K15.1 billion recorded in July 2016.
The deficit represented 0.6 percent of gross domestic product (GDP) which is higher than the 0.03 percent that was registered in the previous month.
During the review period, expenditures totalled K112.2 billion against a total revenue collection
of K83.9 billion.
On an annual basis, foreign inflows also decreased by 77.0 percent from K10.1 billion ($14.0 million) realised in July 2016 according to the report.
In an interview on Saturday, Economics Association of Malawi (Ecama) president Henry Kachaje said although the deficit was expected, there was need to exercise caution on spending.
“The deficit is expected considering that we are still in the initial stages of economic stabilisation. Private sector activities are slowly increasing following the reduced interest rates and falling inflation.
“It is, however, important that caution be exercised in spending so that government does not only spend within budget, but aligns the expenditure to resource availability,” he said, adding that there is a possibility of improved foreign inflows as various off budget supported programmes continue to be implemented expediently.
In a separate interview, Catholic University dean of social sciences Gilbert Kachamba said the widening deficit is a sign that government should tread carefully on expenditure.
“Fiscal discipline is still a challenge and the controls for government expenditure are weak. The deficits are a sign that something is not right on the expenditure side and coupled with reduced foreign inflows. All these may lead to deeper problems if proper measures are not taken,” he said.
International Monetary Fund (IMF) country representative Jack Ree said while the situation requires close monitoring, the run up in recurrent spending might have also been made in expectation of imminent dissemination of donor funding.
The report indicates that at K83.9 billion, total government revenue collections during the review month represented an increase of 1.7 percent from K82.5 billion mobilised in the previous month.
Malawi Revenue Authority (MRA) during the review month recorded an ncreased collection of K78.9 billion from K61.3 billion in the previous month. n
