Malawi expenditure increases by 28.9 percent
Malawi fiscal deficit worsened to K40.4 billion (about $100m) in August from a deficit K15 billion (about $37.5m) in the previous month, prompting government to borrow heavily from both bank and non-bank sectors, official figures show.
The Reserve Bank of Malawi (RBM) August 2013 Economic Review indicates that the rise in the fiscal gap—the difference between central government’s expenditure and revenue—prompted the borrowing of K28.8 billion (about $72m) from the banking system through Treasury Bills (T-Bills) and ways and means while the non-bank sector lent government K8.3 billion (about $20.7m).
But in line with the government’s fiscal anchor of no net domestic financing whose spirit is to prompt private sector credit and growth, the 2013/14 budget projects fiscal balance at K34.8 billion (about $87m).
To apparently avoid crowding out the private sector, the Budget further notes that the deficit will be wholly financed by foreign borrowing amounting to K42 billion which will further finance domestic debt repayment of K7.2 billion.
But recently due to financial mismanagement, the International Monetary Fund (IMF) decided to delay the approval of $20 million (K8 billion) under the three-year Extended Credit Facility (ECF) while Norway announced the withholding of $24 million (K9.8 billion) budgetary support which experts have noted may compel other donors to do the same.
IMF resident representative Geoffrey Oestreicher was quoted in The Nation recently having said that the mission will visit Malawi to assess the situation and reach an understanding on the authorities’ policies and inform the executive board.
But Ministry of Finance spokesperson, Nations Msowoya, in a telephone interview on Monday noted that blamed the ballooning fiscal deficit to an increase in expenditure.
“We will hold discussions with the IMF on possible changes to expenditures so that the fiscal gap remains within permissible levels. There has to be an improvement in the fiscal balance,” said Msowoya.
However, commenting on the withholding of the IMF aid, Msowoya as quoted in The Nation, noted that the delay of the disbursements of budget support will negatively impact on programmes which will have to be postponed to the second half of next year.
But the August RBM economic review notes that total government expenditures rose while revenues declined in the review month.
“Total government expenditures during the month of August 2013 increased by 28.9 percent to K72.3 billion following another monthly increase of 44.7 percent in July 2013.
“Government revenues declined by 22.3 percent to K31.9 billion in the review month following another monthly drop of 15.3 percent registered in July 2013. Both domestic and foreign receipts contributed to the decline in total revenues,” reads the report in part.
The RBM report adds that tax collections dropped by K7.8 billion to K27.6 billion whilst non-tax revenues declined by K1.3 billion to K1.4 billion during the review month while foreign inflows closed at K2.9 billion, a K21.0 million drop from K3 billion foreign receipts that were disbursed in July 2013.