Budget under pressure in first half

Post was last updated: January 20, 2020
Joseph Mwanamvekha

The 2019/2020 national budget came under intense pressure in the first half of the financial year recording deficits in the first five consecutive months up to November as the government spent beyond its means.

Latest figures from the Reserve Bank of Malawi (RBM) have revealed that budgetary operations recorded a deficit of K26 billion in November following another deficit of K12.9 billion in October.

In September, the fiscus recorded a deficit of K17.7 billion, while in August it recorded a deficit of K41.1 billion. Another deficit was recorded in the first month of the fiscal year, July when the government overspent by K34.1 billion.

According to RBM Economic Review for November, total revenues amounted to K83.9 billion while total expenditure amounted to K109.9 billion during the month.

Treasury spokesperson, Davis Saddo, admitted that budgetary operations faced challenges in some months of the first half.

“In some months of the first half we indeed experienced some revenue shortfalls due to slow business performance as a result of a number of factors including the post-election protests that created panic to business environment resulting in slowdown in revenues.

“However, we are optimistic that in the second half, there will be a rebound in performance. With the cited trend, we were very cautious because we had to spend what we had collected and what was available in the national basket focusing on critical areas and sectors,” Saddo said.

Finance Minister, Joseph Mwanamvekha, observed when he presented the national budget that total revenue and grants are projected at K1.575 trillion, representing 25.1 percent of GDP, and an increase of 26.1 percent from the 2018/19 budget approved amount of K1.249 trillion.

He added that domestic revenues are projected at K1.425 trillion, which is 22.7 percent of GDP, comprising K1.369 trillion as tax revenue and K55.8 billion as other revenues or non-tax.

But speaking during the launch of the 10th Malawi Economic Monitor, World Bank County Manager, Greg Toulmin, described the revenue targets for Malawi in the budget as overoptimistic.

“While we understand that they are introducing carbon tax and they are taking other measures to boost revenue, there has to be a risk that they won’t be able to achieve the levels they are hoping to achieve and the consequence of that is they need to make arrangements to manage expenditure so that the expenditure remains within the revenue they receive,” Toulmin said.

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