Government deficit eases in second quarter
Central government budgetary operations deficit improved during the second quarter of 2021, registering a decrease of 1.1 percent of gross domestic product (GDP) compared to 2.6 percent of GDP in the preceding quarter and 1.6 percent of GDP registered during the same period last year.
This is according to figures contained in the Reserve Bank of Malawi (RBM) Financial and Economic Review of the quarter.
During the period under review, total revenue collections were recorded at K379.7 billion, representing an increase of 15.9 percent from K327.6 billion reported in the previous quarter.
The government’s total expenditures declined by 14.5 percent to K485.5 billion, according to the report.
The central bank attributes the development to an increase in domestic revenue mobilisation and reduction in expenditure to major drops under recurrent spending under generic goods and services and transfers related to the Affordable Inputs Programme, which declined by 37.8 percent to K60.9 billion and 95.8 percent to K2.7 billion, respectively.
“Specifically, tax revenues rose by 8.2 percent to K306.8 billion while non-tax revenues reported a growth of 282.8 percent to K44.4 billion mainly following receipts of dividends during the quarter. Meanwhile, grants amounted to K28.5 billion, representing a decrease of 12.0 percent from K32.4 billion received in the first quarter of 2021,” the report reads.
For the 2021-22 financial year, the Treasury projected an overall deficit of K718.3 billion, which is about seven percent of the GDP.
Finance Minister Felix Mlusu said the deficit would be financed through foreign borrowing amounting to K134.8 billion and domestic borrowing amounting to K583.5 billion.
In an interview Sunday, financial market expert Cosmas Chigwe said the quarter two fiscal performance shows that Malawi Revenue Authority (MRA) was able to raise more revenue.
Chigwe said, if the pace by MRA would continue, the country could see a continued decrease in government deficit.
“We may, however, see the deficit increasing again due to purchases of materials under Affordable Inputs Programme as the farming season approaches but if MRA continues with this pace, the deficit would be minimal,” he said.
For the 2020-21 financial year, the Treasury posted a K497.85 billion deficit which was higher than K425.31 billion in the previous financial year.
In its latest Malawi Economic Monitor, the World Bank warned that high fiscal deficits funded by high-cost domestic borrowing pose a great risk to fiscal sustainability.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.