Economists say the slowdown in economic activities occasioned by the Covid-19 pandemic will continue to dampen revenue collection in the short to medium-term, resulting in budget deficits.
The economists were reacting to the K85.7 billion budget deficit which Treasury recorded in November 2020, according to the Reserve Bank of Malawi’s latest figures, largely due to lower-than-expected revenue collection.
The figures released on Friday show that Treasury raised K93.7 billion in November 2020 which was dwarfed by the K179.4 billion expenditure, creating a deficit of K85.7 billion.
The November budget deficit—expenditure exceeding revenue—was far worse compared to the K5.2 billion shortfall recorded in October.
Reads the RBM November Monthly Economic Review Report: “The outcome during the month under review was as a result of a decrease in both domestic revenue collection and foreign receipts.
“In the month [November], government recorded a 26.4 percent decrease in revenue collections while expenditures increased by 35.4 percent.”
In an interview on Sunday, economic statistician Alick Nyasulu said there has been a slowdown in economic activity since the onset of Covid-19 in April 2020 and this will entail lower revenues than expected.
He said: “Expenses will continue to rise to provide key services and we should anticipate an increased budget deficit. There might be inflationary pressures and this trajectory is expected in view of a weakening kwacha.”
On his part, Ben Kaluwa, an economics professor at Chancellor College, a constituent college of the University of Malawi, advised government to strengthen expenditure management.
He said: “With a narrow fiscal space, expenditure prioritisation on domestic resources is key.
“The fiscal deficits will keep on recurring and this indicates more pressure for domestic borrowing which is being exerted on the domestic market.” The RBM report further said domestic revenues in the month under review declined by 17.3 percent to K83.6 billion while foreign receipts declined by 61.6 percent to K10.1 billion.
Under domestic revenue collection, tax revenue collections recorded a decline of 19 percent at K18.4 billion to K78.4 billion.