The Covid-19 pandemic continues to affect the government revenue collection as Treasury recorded a deficit of K55.3 billion in its budgetary operations in May, the Reserve Bank of Malawi (RBM) figures show.
RBM figures published on Tuesday in the May 2020 Economic Review show that the deficit—excess expenditure over income—slightly improved from K62.9 billion recorded in April.
The figures further show that during the month under review, total revenues dropped by a third to K78.6 billion from the previous month’s K112.8 billion.
On the other hand, expenditures declined by 23.8 percent to K133.9 billion from K175.7 billion in April.
The drop in expenditures observed in the month under review was on account of decreases in both recurrent and development expenditures, the RBM said.
Domestic tax revenue mobilisation declined by 12 percent to K73 billion whereas non-tax revenues dropped by 39.3 percent to K3.1 billion in the review month.
In contrast, during the same period last year, the deficit was recorded at K31.1 billion.
Analysts say with Covid-19 effects still persisting, Treasury will continue to record deficits in the subsequent months due to under-collection of revenue by Malawi Revenu Authority.
Ministry of Finance spokesperson Williams Banda was not immediately available for a fresh comment yesterday, but in a recent interview he admitted that Covid-19 is affecting revenue collection; hence, widening budget deficit.
On his part, Betchani Tchereni, economics lecturer at the Polytechnic—a constituent college of the University of Malawi—said government borrowing to finance the deficit may destabilise macroeconomic fundamentals.
He said: “We need to be sure that we are borrowing sustainably and negotiated borrowing.
“In other words, we need cheaper and affordable loans even on the domestic scene.”
Weighing in, Milward Tobias, Centre for Research and Consultancy executive director said borrowing is inevitable, especially now that tax revenue has gone down due to subdued business environment and reduced international trade.
But he emphasised that borrowing must finance production not consumption, saying government should prefer external borrowing because it has low interest rate, long grace period, brings in foreign exchange and crowds in private sector.
The RBM figures further show that foreign receipts declined by 89.7 percent to K2.6 billion following the upsurge reported in the previous month after the receipt of coronavirus related support from development partners.