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Treasury closes financial year with surplus

…thanks to World Bank budget support

Jack Ree

After seeing budget deficit widening for a greater part of the 2018/19 financial year, the Central Government closed its budgetary operations in the last month with a surplus of K54.9 billion.

This is largely attributed to a $40.2 million (about K31.1 billion) direct budget support inflow from the World Bank.

Recent figures from the Reserve Bank of Malawi (RBM) indicate that the surplus was a turnaround from a deficit of K31.1 billion recorded in May 2019.

In the month under review, total revenues and expenditures amounted to K132.7 and K77.8 billion, respectively.

Revenues mobilised in the month registered an increase of K32.8 billion from a total of K100.0 billion mobilised in May 2019.

On the year-to-year basis, revenues recorded an increase of K32.8 billion from K99.9 billion registered in June 2018.

“The recorded increase in revenues in the reviewed month emanated from growth in the grants element, as K31.1 billion ($40.2 million) was received from World Bank as budget support,” indicates RBM in its June 2019 Monthly Economic Review issued on Monday.

However, domestic revenues registered a drop of K1.3 billion from K86.4 billion registered in May 2019.

This was due to a drop in tax revenues amounting to K3.3 billion that more than offset the increase in non-tax revenues totalling K2.0 billion.

Meanwhile, the other project grants amounted to K16.2 billion ($20.7 million), an increase from K13.5 billion ($17.9 million) received in the month of May 2019.

Major grants received in the month under review, other than the World Bank grant, included disbursements from International Development Association (IDA) amounting to $16.0 million (K12.5 billion) towards Malawi Social Action Fund Agriculture Swap and Shire Valley Transformation programme.

Further, International Fund for Agriculture Development transferred funds totalling $2.4 million (K1.8 billion) to Financial Access for Rural Markets Smallholder enterprises and Ministry of Agriculture.

The remaining K1.8 billion ($2.3 million) were transfers to government projects.

Expenditures in the month of June 2019 dropped by K53.2 from K131.0 billion recorded in May 2019.

“This was mainly due to some recurrent expenditure that did not go through in the month. Development expenditures, on the other hand, recorded a small drop of K3.8 billion to K16.3 billion in the review month,” indicates RBM.

In a recent interview, immediate past IMF country representative, Jack Ree, said domestic debt had been growing at an unsustainably rapid speed over the last two years in the country, a condition mainly driven by two consecutive years of elevated budget deficits.

He said Malawi’s problem was that debt was rising to finance consumption more than investment, and the value for money remains poor for funds funneled to investment.

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