Treasury says slowdown in business has left the ficus with rising budget deficits as revenue collection falters.
Ministry of Finance, Economic Planning and Development spokesperson Davis Sado on Wednesday explained that Treasury has been very cautious with expenditure.
Said Sado: “The underlying factor to the deficit can be alluded to the slowdown in business performance which has led to low revenue inflows. As you are aware that we have an agreement with the IMF on the Extended Credit Facility [ECF].
“As such, we have been very cautious and conservative with our expenditure in a way that, as much as possible, we had to spend what we had collected and what was available in the national basket. But what has to be understood is that some of the expenditures we had to make are statutory in nature like salaries and wages including pensions”.Treasury continues to grapple with budget deficits with latest figures from the Reserve Bank of Malawi (RBM) showing a budget deficit of K26 billion in November last year.
In comparison with previous months, the deficit was higher than K12.9 billion and K17. 7 billion recorded in October and September 2019 respectively.
However, year on year, the K26 billion deficit was lower than K54.5 billion registered in the same month in 2018.
Total revenues and expenditures in the month under review amounted to K83.9 billion and K109.9 billion, respectively.
According to published RBM figures on Tuesday, total revenues recorded a decrease of K14.9 billion from K98.8 billion, following another decline of K11.3 billion from K110.1 billion recorded in the preceding month.
In the report, RBM attributed the deficit to declines in domestic revenues as foreign receipts declined albeit marginally.
Chancellor College associate economics professor Levison Chiwaula was quick to point out that as of now, there are little opportunities for tax base broadening due to less economic activities in the economy.
Said Chiwaula: “We need to take note that running a zero deficit budget is not possible, and I don’t see it happening in the near future. What is more important is to reduce the deficit through reducing public expenditure.
“The budget deficits are being recorded partly because after the elections the economy has slowed down due to low economic activities. Although some indicators are showing positive resilience but revenues seem to have been affected significantly.
In his budget statement, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha indicated that overall deficit for 2019/2020 fiscal year is estimated at K155.9 billion, representing 2.5 percent of gross domestic product (GDP). The projection represents a reduction of about 51.3 percent from the 2018/2019 preliminary actual budget deficit of K320 billion.