Treasury starts 2019/20 fiscal year with deficit

Treasury has posted a deficit of K34.1 billion in July, the first month of the 2019/20 fiscal year, Reserve Bank of Malawi (RBM) figures have shown.

In the month, total revenues amounted to K97.3 billion against total expenditures of K131.4 billion.

According to RBM, total revenues in the month under review declined by K35.5 billion to K97.3 billion, contrary to a huge increase in revenues recorded in the preceding month.

This notwithstanding, domestic revenues increased by K10.4 billion to K94.6 billion, mainly due to an increase of K9.5 billion in tax collections as non-tax revenues declined by K902.8 million.

In the report, RBM said the increase in expenditure, at K131.4 billion was due to an increase in recurrent expenditures as development expenditures recorded a drop of K3.5 billion to K12.9 billion.

In the 2019/20 fiscal plan, domestic revenues are projected at K1.425 trillion or 22.7 percent of gross domestic product (GDP), comprising K1.369 trillion as tax revenue and K55.8 billion as non-tax while total expenditure is projected at K1.731 trillion or 27.6 percent of GDP and an increase of 20.1 percent from the 2018/19 preliminary outcome of K1.441 trillion.

Overall deficit is estimated at K155.9 billion or 2.5 percent of GDP, and about 51.3 percent reduction from the 2018/19 preliminary actual budget deficit outturn of K320.2 billion.

The fiscal plan is formulated on assumption that the economy will grow by five percent and seven percent in 2019 and 2020, respectively, an average inflation rate of eight percent during the fiscal year, a stable exchange rate of about K750 to the dollar and a policy rate of 13.5 percent.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira observed that the major risk of maintaining this estimate is that the expenditure side, which may be committed, will not be controlled.

“As such, the economy will end up with another enormous budget deficit compared to that which has been projected. This has been the characteristic of all the budgets of the past five years, by government’s own admission. The consequence has been the plunging of the economy into unsustainable cumulative debt to the magnitude of 62 percent of GDP by December 2018, according to official records,” he said.

Minister of Finance, Economic Planning and Development Joseph Mwanamvekha admitted that Treasury is facing challenges in the areas of fiscal deficits and public debt with government operations recording fiscal deficits which have contributed to rising public debt, recorded at 62 percent of GDP as at end December 2018.