By Taonga Sabola:
Central Government budget recorded a narrower deficit of K13.8 billion in October this year, thanks to improved revenue collected and a slowdown in expenditure, a Reserve Bank of Malawi Monthly Economic Report for October has shown.
The October 2022 deficit, which is equivalent to 0.1 percent of GDP, was far much better than a deficit of K67.7 billion or 0.6 percent of GDP recorded in September 2022, as well as a deficit of 0.8 of GDP for October 2021.
According to RBM, during the month of October, revenues increased by K25.9 billion to K194.7 billion—from K168.8 billion collected in September 2022.
The report says, the October 2022 position was K65.3 billion higher than total collections for October 2021.
“The upturn was supported by both domestic revenues and grants. Specifically, domestic revenues rose by K24.7 billion to K173.3 billion in October 2022, representing the net effect of a K31.4 billion increase in tax revenues and a K6.8 billion decrease in non-tax revenues.
“During the same period, grant receipts also increased by K1.3 billion to K21.4 billion,” the report says.
Expenditures, on the other hand, declined by K28 billion to K208.5 billion in October 2022.
This was a result of a K24.7 billion decrease in recurrent expenditures to K186.1 billion and a K3.3 billion decline in development expenditures to K22.4 billion during the period.
Recurrent expenditures, according to the report, dropped as a result of reductions of K21.8 billion in Ifmis expenses and K8.1 billion statutory expenditures.
Presenting a mid-year budget statement to Parliament on November 25, Finance Minister Sosten Gwengwe said the overall fiscal deficit for the 2022-23 national budget would be narrowed from the proposed K884 billion, which is 7.7 percent of GDP, to K842.1 billion, representing 7.1 percent of GDP.
Gwengwe said the reduction in deficit is mainly on account of projected foreign disbursements on grants and reduction in some expenditure lines.
“Domestic borrowing is expected to reduce from K653.9 billion to K580.9 billion, which is a decrease of K72.9 billion. Overall, you will recall that we targeted to reduce the fiscal deficit from 8.8 percent of GDP in 2021-22 to 7.7 percent in 2022-23 fiscal budget.
“But now we have gone further and budgeted to achieve an even lower fiscal deficit of 7.1 percent of GDP. All of this is aimed at curbing inflation rate and achieving debt sustainability for macroeconomic stability,” Gwengwe said.
But in its 16th Malawi Economic Monitor, the World Bank notes that despite some progress toward fiscal consolidation, budget discipline remains a challenge.
According to the bank, higher government spending during the first half of the fiscal year widened the fiscal deficit, exerting pressure on the government’s fiscal consolidation plans announced in the FY2022-23 budget.
It says revenue collection slightly underperformed in the approved target, and together with higher recurrent spending, resulted in an above-target fiscal deficit.