Central government budgetary operations recorded deficits in January and February due to lower than expected tax collection by Malawi Revenue Authority (MRA), latest figures from the Reserve Bank of Malawi (RBM) show.
This is a continuation of deficits largely recorded in the first half (July to December) of this fiscal year due to under-collection by MRA.
RBM figures released on Tuesday indicate that in two months, Treasury posted a total deficit of K31.5 billion, out of which, K15.4 billion was recorded in January before rising to K16.1 billion in February.
RBM February Monthly Economic Report said the decline in revenue was due to a drop in revenues largely on account of a decrease in the tax component.
Reads the report: “Tax revenue collections decreased by K6.6 billion to K78.4 billion, while non-tax revenues registered an increase of K1.8 billion to K4.4 billion, mainly emanating from the increase in departmental receipts.
“Foreign grants received in the month of February 2019 totalled K4.4 billion [$5.9 million].”
In the first half, government operations recorded deficits in four months August (K4.5 billion), October (K27.6 billion), November (K54.5 billion) and December K13.3 billion. This is against surpluses in July (K13.5 billion) and September (K3.8 billion).
In an interview yesterday, tax expert Emmanuel Kaluluma, who is senior tax consultant at E.K Tax Consultant, while observing that this could be due to the lean season, said the decline on tax component could also affirm fears that the economy is not well.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said a decline in government revenue could push up government borrowing which crowd out the private sector affecting macroeconomic balance.
“We can speculate that therefore unless we are told otherwise, this could be a seasonal trend.
“If it is from decreased business activity as speculated, then its worrying for both short and long -term as it means we are not building a sustainable economy,” he said.
Minister of Finance, Economic Planning and Development Goodall Gondwe earlier conceded that most of the reported cases of overexpenditure were related to the May 21 2019 Tripartite Elections.
During the first-half of the 2018/19 financial year, Treasury beat its domestic revenue target by 3.8 percent or K18.6 billion with a total collection of K514.8 billion.
Tax revenue over-performed by K22.4 billion while, non-tax revenue fell short of target by K3.7 billion or 9.5 percent.