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Treasury explains first quarter budget deficit

SADO—We borrowed locally

Treasury has attributed the budget deficit recorded in first quarter of the 2019/20 financial year to reduced domestic revenue collection among major factors.

Figures from the Reserve Bank of Malawi show that Treasury recorded a budget deficit of K90.61 billion during the period under review, a development rated by economists as worrisome.

The figures show that total revenues in the first quarter were recorded at K296.20 billion, representing 4.96 percent of Gross Domestic Product (GDP).

Of the amount, K276.93 billion was domestic revenues while K15.52 billion was grants.

This represents a K90.61 billion Kwacha deficit accrued in the first quarter.

However, Treasury said the deficit could be less after proper reconciliation.

In an interview, Ministry of Finance Spokesperson, Davis Sado, said the deficit was serviced through domestic borrowing.

“In a deficit like this, we borrowed locally using instruments such as treasury notes and treasury bills but we are comparatively working on reducing deficit in the financial year. However, I must say that there was a discrepancy on the figure and we are working on it but the expenditure could be less,” Sado said.

He said a wave of demonstrations that erupted during the period under review partly affected revenue collection.

In a separate interview, Economic commentator, Collen Kalua, cautioned the government to manage its appetite for domestic borrowing.

“Credit facilities become expensive to private sector, and eventually players are pushed out,” Kalua said.

A deficit of K320.2 billion was recorded during the 2018/19 fiscal year on account of over-expenditures on interest payment, expenses in response to the impact of tropical cyclone Idai and non-disbursement budget support.

The deficit was financed using both foreign resources at K61.3 billion and domestic resources at K258.9 billion.

Speaking when presenting the National Budget to Parliament recently, Finance Minister, Joseph Mwanamvekha, conceded that the government is facing challenges in the areas of fiscal deficits and public debt.

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