Treasury in K19bn surplus

For the first time in the 2020/21 financial year, Treasury recorded a K19.1 billion surplus in April, a turnaround from a K88.1 billion deficit registered in March, a Reserve Bank of Malawi (RBM) report indicates.

This is the first surplus recorded by Treasury in 10 months, a situation economists say is a step towards a positive direction.

RBM figures show that in the current financial year which ends on June 30, Treasury deficits have accumulated to K460.2 billion.

But the latest Monthly Economic report for April shows government recorded a surplus equivalent to 0.2 percent of gross domestic product (GDP), compared to a deficit that was equivalent to 0.9 percent of GDP in the previous month.

The April 2021 fiscal position was an improvement from a deficit equivalent to 0.7 percent of GDP recorded in the corresponding month in 2020.

The report shows that total government revenues rose by 14.4 percent from K18.8 billion to K149.5 billion in April 2021 following another increase of 30.8 percent to K130.8 billion in March 2021.

The increase in revenues, according to the report, was attributed to domestic revenues which expanded by 20.3 percent to K137.6 billion in April 2021 from the preceding month’s of K114.4 billion.

Reads the report in part: “Both tax and non-tax revenues contributed to the growth in domestic revenues.

“In particular, tax revenues recorded a monthly increase of 11.7 percent to K104.3 billion while non-tax revenues rose by 58.4 percent to K33.3 billion during the same period.”

According to the report, expenditures on the other hand declined by 40.4 percent to K88.4 billion from K130.4 billion in April 2021 compared to an increase of 52.3 percent to K218.8 billion recorded in the preceding month.

RBM attributed the outturn to decreases in both recurrent and development expenditures.

Said the bank: “Recurrent expenditures declined by 41.5 percent from K83.2 billion to K117.2 billion in April 2021 and this was noted across major expenditure categories, including public debt interest payments by 41.3 percent to K28.2 billion; salaries by 35.4 percent to K36.1 billion; and other local transfers by 91.7 percent to K2.9 billion.”

The central bank said during the same period, development expenditures also dropped by 28.6 percent to K12.9 billion.

University of Malawi economics professor Ben Kaluwa has since advised the government not to relax, but ensure that it holds on to the direction that it has taken.

He said: “We have the scale of biting the bullet [making tough decisions] and it seems government has taken this direction.

“Going forward, government needs to consider zero-based budgeting where it should cease to worry about historical things it used to spend money on.”

Treasury had projected the 2020/21 financial year to end with a fiscal deficit of K810.7 billion, representing 8.8 percent of GDP.

The deficit is expected to be covered through foreign financing of K246.3 billion, with the balance of K564.4 billion earmarked to be financed through domestic borrowing.

For the 2021/2022 financial year, Minister of Finance Felix Mlusu indicated that the overall balance is estimated at a deficit of K718.3 billion, which is seven percent of the rebased GDP. n