Budget deficit continues to widen—RBM figures

Treasury has continued to spend more than the revenue it is generating in the 2020/21 fiscal year largely due to declining revenues, figures from the Reserve Bank of Malawi (RBM) show.

The figures show that in December alone, the budget deficit widened to K82.2 billion or 1.2 percent of gross domestic product (GDP), slightly lower than K85.7 billion or 1.3 percent of GDP in the prior month.

The figures contained in the latest Financial and Economic Review for December 2020 show that cumulatively in the second quarter (October to December) of the fiscal year ending June 30, budget deficit widened to K173.1 billion from K66.3 billion.

Although revenues increased by 59.8 percent to K149.7 billion in December 2020, they were outweighed by expenditures which grew by 29.3 percent to K231.9 billion, the figures further show.

The growth in expenditures during the review month, according to RBM, was on account of an increase in both recurrent expenditures and development expenditures.

Reads the report in part: “Recurrent expenditures increased by 30 percent [K49.2 billion] to K213.1 billion. Specifically, major expenditure increases were observed in salary payments, generic goods and services and interest payments.”

On the revenue side, this was on account of increases in both domestic revenues and foreign receipts. Domestic revenues rose by K11.8 billion to K95.4 billion in December 2020, the report shows.

Economists have since expressed concern over rising deficits, saying it could affect budget implementation.

In an interview economic statistician Alick Nyasulu said there has been a slowdown in economic activity, which will mean lower revenues than expected.

He said: “Expenses will continue to rise to provide for key services and we should anticipate an increased budget deficit.”

Minister of Finance Felix Mlusu is on record as admitting admitted that all has not been rosy when it comes to revenue and expenditure trajectory in the first four months of the 2020/21 Budget implementation.

The minister is expected to present the Mid-Year Budget Review Statement on Friday which will outline how the budget has performed over the past six months.

The 2020/2021 National Budget is pegged at K2.2 trillion.

A fiscal deficit of K754.8 billion is projected this fiscal year, which is expected to be financed by foreign borrowing amounting to K224.8 billion and K530.1 billion from domestic borrowing.