Government has for the second month running recorded a decline in total revenues with available statistics from the Reserve Bank of Malawi (RBM) indicating a 6.7 percent slump in December to K74.7 billion.
This follows another decrease of 1.9 percent to K80.1 billion recorded in the preceding month.
On a yearly basis, total revenues dropped by 9.8 percent from K82.8 billion recorded in December 2016.
According to the Reserve Bank of Malawi (RBM) December 2017 Monthly Economic Review, the downturn was on account of a drop in foreign receipts while domestic revenues recorded a marginal increase that helped to slightly offset the decrease.
Foreign inflows dropped by K5.6 billion to K5.1 billion from an increase of K7.8 billion to K10.7 billion recorded in the preceding month.
On an annual basis, foreign receipts dropped by K310.3 million from K5.4 billion recorded in December 2016.
The development is coming at a time government is proposing to expand its domestic borrowing limit from the current K27.8 billion to K47.1 billion, a move experts argue is symptomatic of financial distress that may lead to technical insolvency or bankruptcy.
In an interview yesterday, RBM spokesperson Mbane
Ngwira said the drop indicates how the economy performed then and not an indication of how it is going to perform in future.
He said: “On government revenue, it is clear that government has to find means of covering for the loss. Whether it will affect its operations depends on the availability of alternative sources of funding.”
In an earlier interview, economist Henry Kachaje, who is also former president of Economics Association of Malawi (Ecama), said reduced foreign inflows can be directly attributed to the unpredictability of off-budget support, which is determined by various projects implementation, unlike direct budget support where disbursements are predictable and timely.
Finance, Economic Planning and Development Minister Goodall Gondwe is on record as having said that apart from missed domestic revenue targets, a K55 billion budget support Treasury expected from European Union is likely not to materialise.
Government expected domestic revenue to remain buoyant to offset withdrawal of budget support and dedicated grants.
It had also anticipated that the K946 billion recurrent expenditure of which K346 billion was for development would be wholly financed by domestic resources for government to remain with balance for other activities, but this has so far not come to pass.
As a result, government has been borrowing heavily to meet some budget requirements.
RBM figures show that central government budgetary operations for the month of December 2017 culminated into a deficit of K16.8 billion, a drop from a deficit of K40.3 billion recorded in November 2017, and a turnaround from a surplus of K6.9 billion recorded in December 2016.
The fiscal deficit at that level represented 0.4 percent of gross domestic product (GDP).
Total expenditure in the preview month on the other hand amounted to K91.5 billion against revenues of K74.7 billion.