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Treasury records K90 billion deficit in first quarter

Treasury recorded a budget deficit of K90.61 billion during the first quarter of the 2019/20 financial year, a development rated by economists as worrisome.

Figures contained in the Reserve bank of Malawi (RBM)’s Monetary Policy Public Report for November 2019 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.

Total expenditures stood at K386.81 billion, representing 6.48 percent of GDP.

Economic commentator, Edward Chilima, Monday said while the situation is not strange for the country, it still poses a threat to budget operations.

“In my view, deficit financing is not strange, and not new. Only that it means the country is still vulnerable and has to pray for continued donor support. MRA [Malawi Revenue Authority] has to continuously increase tax collection mechanisms to minimise the deficit,” Chilima said.

He said the status qou entails some projects in the budget may have to be revised, most likely in the mid-year budget review.

Other economic commentators have been urging the Treasury to consider cutting public debt and narrowing budget deficit if the country is to sustain economic gains.

In the 2019/20, total revenue and grants are projected at K1.6 trillion, representing 25.1 percent of GDP. This is an increase of 26.1 percent from the 2018/19 budget.

Grants are projected at K150.1 billion, representing 2.4 percent of GDP and comprises K107.4 billion from international organisations and K42.7 billion from foreign governments.

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.

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.

During the year, revenues and grants amounted to K1.121 trillion representing 19.9 percent of the country’s GDP.

Domestic revenues grossed to K1.006 trillion against a target of K1.052 trillion.

Mwanamvekha told Parliament that the under collection was largely on account of unsatisfactory performance taxes and parastatal dividends.

Grants also declined to K115.1 billion from the budgeted amount of K197.1 billion, largely on account of the non-disbursement of K60 billion budget support.

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