Treasury explains Q3 budget deficit

Treasury says reduced domestic revenue collection in the third quarter (January to March) of this fiscal year ending June 30 is largely due to under-collection in some of the tax lines.

The explanation comes in the wake of widening budget deficit of K120 billion or two percent of gross domestic product (GDP) in the third quarter, from K96.4 billion or 1.8 percent of GDP in the second quarter (October to December 2018).

This is a continuation of deficits as in the first quarter (July to September 2018), budgetary operations also recorded a deficit of K86.1 billion or 1.5 percent of GDP.

Treasury spokesperson Davis Sado said in an e-mail response yesterday  the third quarter deficit was due to the impact of weather-related shocks experienced in the country which affected the economic environment.

“At mid-year, it was envisaged that revenue performance would continue on the growth trajectory due to improved economic environment such as improved energy supply and the opening of the tobacco marketing season,” he said.

Sado said as result of this, revenue performance has plummeted, especially taxes on income and profits, taxes on goods and services and on international trade and transactions.

He said going forward, Treasury intends to strengthen revenue collection systems by leveraging on use of modern technologies to enhance efficiency in resource mobilisation.

“Further, government intends to undertake revenue policy reviews with a view to expand the revenue base and eventually reduce budget deficits by enhancing domestic resource mobilisation efforts,” he said.

While revenue performance in the first half (June to December ,2018 of the 2018/19 fiscal year has been impressive, Sado said revenue performance has been challenging in the second half of the fiscal year.

Treasury figures indicate that at mid-year, domestic revenue outturn was K514.8 billion, representing an over-performance of K18.6 billion with tax revenue over-performing by K22.4 billion while non-tax revenue fell short of the target by K3.7 billion.