Fiscal deficit seen at K14 billion

Fiscal deficit seen at K14 billion

Post was last updated: March 24, 2020

SADO—There were a lot of internal trading

Treasury recorded a deficit of K13.9 billion in January 2020, representing 0.2 percent of the Gross Domestic Product (GDP), from K33.9 billion recorded in the preceding month, latest figures from the Reserve Bank of Malawi (RBM) shows.

During the month under review, total revenues amounted to K110.4 billion against total expenditures of K124.3 billion.

Treasury had to borrow domestically to finance the deficit, an option seen to have detrimental effect to the economy as it entails crowding out the private sector.

This comes as fiscal pressure, unpredictability of budget support, procurement hurdles, and poor public finance management remain key risks facing the 2019/2020 National Budget.

In an interview yesterday, Treasury spokesperson, Davis Sado, said the narrowing of the deficit implies that there was an improvement in revenue collection, attributed to stability in the operating environment.

He said notwithstanding the coronavirus spread, fiscal performance looks positive in the remaining months of the 2019/20 fiscal year.

“In the first and second quarters of the year, there were many disturbances in the business environment due to a number of factors.

“As we went towards end of the first half, there was a bit of stability and people were able to do business. Equally there were a lot of internal trading and as a result of that the revenue collection body was able to collect more.

Catholic University dean of Social Sciences, Gilbert Kachamba, said going forward, Treasury should intensify fiscal discipline and curb corruption at all levels and ensure prudent revenue collection by the revenue collection body to avert inconsistencies in budget implementation.

“There are two sides to this development; on one side, it is a good development as it shows that there is an improvement in fiscal discipline and also that revenue collection has increased in reference to expenditure or that expenditure has gone down with constant revenue.

“On the other hand, it is a sign that the government has reduced expenditure and if this reduction is at the cost of welfare and development then it is not a good thing,” Kachamba said.

Recently, World Bank Country Manager, Greg Toulmin, called for fiscal prudence, urging the government to consider operating within set budget ceiling and avoid incurring a huge deficit.

In the first half of the current financial year, Treasury recorded a deficit of K165.7 billion, representing about 4 percent of GDP.

At the start of this fiscal year in July 2019, Treasury posted a K34.1 billion deficit, which rose to K41.1 billion in August 2019.

The deficit dropped to K17.7 billion in September 2019 and eased further to K12.9 billion in October 2019. It picked up to K26 billion in November 2019 and in December 2019 the deficit reached K33.9 billion.

Malawi’s volatile economy, where businesses remain subdued and most sectors are not ticking, astounded by myriad woes emerging out of the May 21 2019 elections disputes, and long-term inconsistencies in policy direction.

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