Treasury has recorded a deficit of K165.7 billion or about four percent of gross domestic product (GDP) in the first half (H1) of this fiscal year, figures from the Reserve Bank of Malawi (RBM) show.
At K165.7 billion half-year deficit or 9.7 percent of the K1.7 trillion 2019/20 National Budget, the development means Treasury has surpassed this fiscal year’s deficit target of K155.9 billion or 2.5 percent by K9.8 billion.
This deficit, set to be confirmed during the Mid-Year Budget Review presentation by Minister of Finance, Economic Planning and Development Joseph Mwanamvekha this Friday, will likely put Treasury under pressure.
Treasury will have to borrow domestically to finance the deficit, a development that could crowd out the private sector or cut some budget lines.
Economics Association of Malawi (Ecama) has since asked Treasury to improve its revenue projections, which forms the basis for budget formulation and that Malawi Revenue Authority (MRA) should improve revenue
mobilisation and efficiency in revenue collection.
In an interview on Sunday, Ecama president Lauryn Nyasulu said Treasury will have to revise the budget to reflect the real situation in as far as the resource envelope is concerned.
“It is our hope that the key sectors of health, education and agriculture do not face major cuts because of their direct bearing on human capital development and food security,” she said.
Ministry of Finance, Economic Planning and Development spokesperson Davies Sado attributed the deficit partly to the slowdown in business performance during the review period, which has affected MRA revenue collection.
He said: “As a way forward, we will keep intensifying revenue collection and enforcing compliance from taxpayers.
“We will be conducting business interviews to appreciate challenges the business community is experiencing and see how best we can resolve the challenges.”
Last week, the World Bank asked Treasury to carefully manage increased expenditure pressures ahead of the fresh presidential election to avoid incurring a huge deficit.
The bank’s country manager Greg Toulmin said achieving a budgeted fiscal deficit for the 2019/20 financial year will be a challenge; hence, the need to strengthen fiscal discipline.
He said: “Government has regularly faced various unexpected shocks which have impacted on fiscal policy.
“To prepare for such inevitable shocks, it is important to strengthen fiscal discipline, particularly during budget formulation to reduce debt and to help build up fiscal buffers.”
RBM figures show that at the start of this fiscal year in July, Treasury posted a K34.1 billion deficit, which hit K41.1 billion in August.
The deficit dropped to K17.7 billion in September and dropped further to K12.9 billion in October before picking up to K26 billion in November. The deficit for December is recorded at K33.9 billion.