IMF forecasts mixed fortunes for fiscus
The International Monetary Fund (IMF) has projected mixed fortunes for the country’s fiscal plan amid elevated risks to the fiscal outlook.
In its October 2021 Fiscal Monitor, the global lender projects government revenue in the current financial year at 14.3 percent of the gross domestic product (GDP) or K1.273 trillion while government expenditure has been projected at 22.5 percent of GDP or K2 trillion.
The IMF also projects fiscal operations to result in overall balance or fiscal deficit of 8.2 percent of GDP or K730 billion.
This could potentially push government debt to a projected 59.3 percent of GDP or K5.278 trillion during the year under review. As of December 2020, public debt stock stood at K4.9 trillion.
While the deficit is below Treasury’s projected K723.8 billion for the nine month financial year, both revenues and expenditure fall below government’s projections.
In the 2021/22 fiscal year, Treasury has projected government’s expenditure at K1.9 trillion while revenues were projected at K1.1 trillion.
In its analysis, the IMF observed that as the world strives to bring Covid-19 under control, fiscal policy remains key to addressing the impact of the pandemic, which continues to be marked by uncertainty and unequal access to vaccines across countries.
Reads the IMF report in part: “In many advanced economies, fiscal policy continues to be accommodative and is shifting towards strengthening economies through a green transition, digital transformation and other long-term investments.
“The large fiscal packages announced or approved by the European Union and the United States could add a cumulative $4.6 trillion to global GDP between 2021 and 2026.”
In contrast, the IMF said in emerging markets and low-income developing countries, including Malawi, growth is held back by the low availability of vaccines and governments are shifting expenditures toward addressing pandemic-related priorities.
“Higher interest rates and lower government revenues have strained the capacity of low-income developing countries to provide fiscal support and service their debt,” reads the report.
Two months into the financial year, Treasury has posted a cumulative deficit of K56.4 billion, with a deficit of K9.6 billion posted in August and another deficit of K46.8 billion recorded in July, according to published Reserve Bank of Malawi figures.
Ironically, revenue collection by Malawi Revenue Authority in August increased by 15.7 percent from K112.5 billion that was collected in July.
On a year-on-year basis, the August 2021 position represents an increase of 26 percent from K103.3 billion recorded in August 2020.
In an interview on Tuesday, Malawi University of Business and Applied Science economics associate professor Betchani Tchereni described the deficits as worrisome, “especially that our priority is to be on a growth trajectory”.
“We really need to work hard all of us as a nation, create more wealth,” he said.
Minister of Finance Felix Mlusu earlier effected a K5.5 billion upward adjustment to the proposed K1.9 trillion 2021/22 Budget, pushing up the deficit to K723.8 billion.
