Ministry of Finance, Economic Planning and Development has admitted that poor business operating environment is hitting hard on the fiscal plan as Malawi Revenue Authority (MRA) is failing to collect enough revenue.
The ministry’s spokesperson Davis Sado was reacting to the continued deficit in government budgetary operations, according to figures from the Reserve Bank of Malawi (RBM).
The RBM Third Quarter Performance Review shows that in the first quarter (Q1) of 2019/20 National Budget, Treasury posted a deficit of K58.8 billion largely due to under collection by MRA.
However, this year’s deficit could be a slight improvement because during the same period last year, budgetary operations recorded a deficit of K85.5 billion, about 1.5 percent of gross domestic product (GDP).
Said Sado: “The deficit is partly attributed to the slowdown in business performance in the said quarter.
“As a way forward, we will keep intensifying on 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”.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe in an interview on Monday said deficits generally are not good for a national budget.
“Budget deficits have several implications particularly on the successful implementation of the budget if government fails to finance the deficit.
“The deficit increases the national debt, which causes economic instability if it reaches the levels that cannot be sustained,” he said.
In the quarter under review, total revenue collection and total expenditure amounted to K294.6 billion and K353.5 billion, respectively.
Total revenues decreased by K47.9 billion to K294.6 billion compared to an increase of K84.8 billion to K342.5 billion in the preceding quarter.
University of Malawi’s Polytechnic economics lecturer Betchani Tchereni said if left unchecked, deficits could harm the economy.
He explained: “What this means is that the tax collector is trying its best, but the economy is not generating enough revenue that can square the needed expenditures in the budget.
“We are having bigger deficits and government will be forced to borrow, and it is the borrowing that will cause discomfort in some macroeconomic variables, which may induce high inflation.”
Tchereni described the deficits as a wake-up call for Treasuy to consider ways of expanding productive sectors of the economy by investing with locally-generated funds.
He faulted both the private and public sectors for leaving the key and critical development sectors that would have multiplier effect on the economy.
Figures show that domestic revenue collections increased by K30.2 billion with tax collections rising by K28.9 billion to K272.9 billion while non-tax revenues increased by K1.3 billion to K11.8 billion in the quarter under review.