Malawiâ€™s overall budget deficit for the 2011/2012 controversial zero-deficit budget (ZDB) settled at K84.1 billion (about $280 million) as at end June 2012 which is against a programme target of K67.9 billion (about $226 million), Business News has learnt.
It has also been learnt that total expenditure and net lending in 2011/12 fiscal year amounted to K341.1 billion (about $1.1bn) against the June programme target of K328.1 billion (about $1.09bn) reflecting a K13 billion (about $43 million) expenditure overrun.
The recording of such a huge deficit sharply contradicts the core objective of the 2011/12 budget which sought to finance its recurrent expenditure by locally generated resources as envisioned by the late president Bingu wa Mutharika.
Huge budget deficits as the one incurred during the previous fiscal year is often feared for low investments as governments are prompted to emphasise on loan repayment more than savings and repayment in subsequent financial years.
Budget deficit is the difference between what government collects in terms of revenue and what it spends during a fiscal year. It is often used to assess the fiscal health of an economy.
Finance Minister Dr. Ken Lipenga informed Malawiâ€™s key donors under the Common Approach to Budget Support (Cabs) who convened last week in Lilongwe that to finance the deficit, government had to resort to borrowing locally as well as externally.
â€œThe deficit was fully financed by both foreign and domestic borrowing comprising K19.5 billion [about $65 million] foreign borrowing and K64.5 billion [about $215 million] domestic borrowing,â€ Lipenga told donors.
Overall, he said performance in 2011/12 fiscal year â€œwas below our expectationsâ€ largely on account of low inflows due to non-disbursement of pledged support by the cooperating partners and some expenditure overruns.
Government has since attributed over expenditure under recurrent expenditure to the marginal increase in wages and salaries, especially in Education, Health and Agriculture ministries for new recruitments, and a substantial amount of arrears that were paid to the Judiciary.
Government has also attributed expenditure overruns in other recurrent transactions (ORT), on one hand, to the unforeseen expenditure vote where funeral expenses for the late head of State were charged.
Lipenga explained that during the fiscal year under review, revenues underperformed by K3 billion (about $10 million), which, he said, is approximately 0.5 percent of Gross Domestic Product (GDP).
He said the programme target, as per Malawiâ€™s agreement with the International Monetary Fund (IMF) in June, was K260.2 billion (about $867m), but said only K257.1 billion (about $857m) was realised by June 2012.
The underperformance in total revenues was despite the fact that domestic revenues exceeded the June programme target by about K6.8 billion (about $22m) as K214.3 billion (about $714m) was collected against the June target of K207.5 billion (about $678m).
According to Lipenga, recurrent expenditure accounted for K260.6 billion (about $868m) against the programme target of K250.7 billion (about $835m) while development expenditures amounted to K80.5 billion (about $268m) against the programme target of K77.4 billion (about $258m).
â€œGrants on the other hand underperformed by K9.9 billion (about $33m) from the June programme target of K52.7 billion (about $175m) to K42.8 billion (about $142m).
â€œThis is largely on account of dedicated grants under NAC [National Aids Commission] and Education SWAp which were not fully disbursed during the year and also non-disbursement of budget support,â€ said the Finance Minister.