Domestic revenue declined by 19.9 percent in August following underperformances in both tax and non-tax revenue, Reserve Bank of Malawi (RBM) figures have shown.
In its August 2020 Monthly Economic Review, RBM said as a consequence, revenues during the month fell by 4.1 percent to K103.3 billion in August 2020.
Reads the report: “Tax revenue and non-tax revenue declined by 17.9 percent and 50.6 percent to K77.1 billion and to K3.0 billion, respectively.
“Meanwhile, foreign receipts from development partners increased by 200.9 percent to K23.2 billion in the month under review.”
This was mainly explained by a receipt of K16.1 billion ($21.4 million) direct budget support from African Development Bank (AfDB) to support Malawi’s Covid-19 for cushioning the economy from the negative impact of the pandemic on the fiscal and current account balances
During the month under review, revenue decreased by 23.2 percent to K109.8 billion in August 2020 with major cuts observed in both recurrent and development expenditures.
While recurrent expenditures fell by 14.8 percent to K99.9 billion and development expenditures decreased by 61.5 percent to K9.9 billion.
Under recurrent expenditures, salaries, statutory expenses and expenditures on goods and services recorded drops of 31.0 percent, 34.3 percent and 10.1 percent, respectively.
“On the other hand, reduced utilisation of project funds contributed to lower development expenditures in the month under review,” reads the report in part.
Meanwhile, Treasury closed the month with a deficit of K6.5 billion or 0.1 percent of gross domestic product (GDP), compared to a deficit of K35.3 billion (0.5 percent of GDP) recorded the previous month.
In the 2020/21 Financial Year, Treasury projects domestic revenues at K1.179 trillion or 16.5 percent of GDP with K1.116 trillion in tax revenue while K63.1 billion is other revenues.
Expenditure, on the other hand, is projected at K2.190 trillion or 30.6 percent of the country’s GDP and representing an increase of around 22.9 percent from the 2019/2020 preliminary expenditure outturn.
Treasury projects fiscal deficit at K754.8 billion, which will be financed by foreign borrowing amounting to K224.8 billion and K530.1 billion from domestic borrowing.
Speaking when he and his management appeared before the Budget and Finance Committee cluster of Parliament in September, MRA commissioner general John Bizwick said the public tax collector is optimistic of meeting its revenue target set in the budget buoyed by reforms that will be implemented to enhance revenue collection.
However, tax expert Emmanuel Kaluluma observed that activities necessitated by the Covid-19 pandemic, revenue realiasation would be difficult as the situation puts a strain on the already narrow tax base.
He said: “Already we have always complained of a narrow tax base, but now people who were in the tax net are not conducting business because of the pandemic.
“Even if Covid-19 stops today, the damage could have been done on business, most of which are yet to recover.”
Finance Minister Felix Mlusu said in his 2020/21 Budget Statement that government will implement tax administration reforms at the Malawi Revenue Authority (MRA) to ensure taxpayer compliance and enhanced tax revenue collections through automation, audits and taxpayer awareness campaigns.