Treasury in K275bn deficit in 5 months

Treasury continues to record deficits in its budgetary  operations as expenditures are more than revenues being generated, figures from the Reserve Bank of Malawi (RBM) show.

The figures show that in November, the budget deficit stood at K72.1 billion or 0.7 percent of nominal gross domestic product (GDP). This is slightly lower than K79.5 billion or 0.8 percent of GDP in recorded in October.

The figures contained in the latest RBM Financial and Economic Review for November 2021 show that cumulatively in the first five months of this fiscal year which ends on March 31, budget deficit widened to K275.1 billion.

RBM figures show that in November, total revenues and expenditures amounted to K117.3 billion and K189.4 billion, respectively.

Reads the report in part: “Revenue mobilisation for the month of November declined by 10.3 percent to K117.3 billion collected in October 2021. The decrease in total revenues was explained by a drop in domestic revenues.

“On the other hand, expenditures stood at K189.4 billion recorded in October 2021.”

Cumulatively, Treasury has in the five-month period collected K616.5 billion in revenues against expenditures at K891.6 billion, creating a deficit of K275.1 billion.

In a written response on Tuesday, Ministry of Finance spokesperson William Banda was, however, upbeat that revenues will perform well due to enforcement and relaxation of Covid-19 measures.

He said: “We do not expect underperformance of domestic revenues due to vaccines and enforcement of the fiscal measures that were gazetted. 

“Suffice to say a huge underperformance may result in prioritisation of resources and effective use of resources, including cutting down on some expenditures, but the ministry is monitoring the economic situation to ensure that there is no huge impact on the budget.”

Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni in an interview on Tuesday expressed fear that the rising fiscal deficit is a concern as it is fuelling debt on the domestic market.

“Financing deficits is mostly done through borrowing on the financial market within the country, which may end up becoming unsustainable and disturb the macro-economic environment,” he said.

In Malawi, previous experience has shown that deficits have been financed mainly by costly domestic borrowing.

The rising domestic financing since 2018 as well as borrowing from development banks on non-concessional basis has increased Malawi’s public debt, which now stands at K5.5 trillion or about  62 percent of the nominal gross domestic product (GDP) pegged at K8.9 trillion.

Meanwhile, in view of the revenue under collections, the 2020/21 budget was revised upwards from K2.19 trillion to K2.334 trillion with total revenues and grants revised upwards from K1.435 trillion to K1.523 trillion, representing 16.5 percent of GDP.

The increase also triggered a yawning deficit from K755.1 billion to K810.7 billion, representing 8.8 percent of GDP, which was expected to be covered through foreign financing of K246.3 billion, with the balance of K564.4 billion to be financed through domestic borrowing.

In the 2019/20 financial year, Treasury posted a K497.85 billion deficit, higher than K425.31 billion in the prior financial year.

Meanwhile, Malawi Revenue Authority  is targeting K1.033 trillion in revenue, which is a 26 percent growth considering that this fiscal year runs for nine months.

On the other hand, total expenditure for the 2021/2022 fiscal year is programmed at K1.99 trillion.