Reserve Bank of Malawi (RBM) figures show that Treasury closed the third quarter (October to December) of the 2022/23 financial year with a K192.1 billion deficit.

In its December 2022 Monthly Economic Review, RBM data shows that in December, Treasury recorded a deficit of K72.9 billion, which was an improvement from a deficit of K104.4 billion recorded in November. In October, Treasury recorded a deficit of K13.8 billion.

Reads the RBM report in part: “Resource mobilisation in the month under review increased by 37.8 percent or K54.6 billion to K199 billion from K144.4 billion collected in November 2022.

“Domestic revenues rose by 43.2 percent or K52.6 billion to K174.2 billion on account of a K44.5 billion increase in non-tax revenues and a seven percent or K8 billion increase in tax revenues.”

On the other hand, grants increased by 8.8 percent or K2 billion to K24.8 billion in the month under review.

The data shows that in December 2022, total expenditures increased by 9.3 percent or K23.1 billion to K271.9 billion, with recurrent expenditure increasing by 7.5 percent or K16.3 billion to K232.6 billion.

Development expenditure, on the other hand, increased by 21.1 percent or K6.8 billion to K39.4 billion, figures show.

In the 2022/23 financial year, Treasury wants to close the financial year with a deficit of K842.1billion.

In the second half of this fiscal year, Treasury projects an overall deficit of K316.8 billion, which is a decline from the K525.3 billion deficit recorded in the first half of this fiscal year.

In an earlier interview, Economics Association of Malawi executive director Frank Chikuta urged Treasury to control budget deficit to ensure that the fiscal plan does not go off-track and strain the economy further.

He urged Treasury to ensure that it maintains the deficit within the targeted limit.

“It would be better to see that the budget is not increasing because if the outcome is higher than the programme, then this is certainly something which needs to be given attention,” said Chikuta.

Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said in an interview the rising fiscal deficit is a concern because it fuels debt on the domestic market.

“Financing deficits is mostly done through borrowing on the financial market within the country, which may end up becoming unsustainable and disturb the macro-economic environment,” he said.

In the 2022/23 fiscal plan which runs up to March 31 this year, overall fiscal deficit is estimated at K884 billion, which is 7.7 percent of gross domestic product, the broadest measure of economic output.

The deficit is expected to be financed through domestic borrowing amounting to K653.9 billion and foreign borrowing amounting to K230.07 billion.

But available figures compiled by investment advisory firm Bridgepath Capital show that within five months of this fiscal year, Treasury had already borrowed K612 billion or 94 percent of the planned K653.9 billion domestic borrowing.

Minister of Finance and Economic Affairs Sosten Gwengwe is quoted as having said that government will ensure implementation of fiscal consolidation measures to enhance revenue collection and manage expenditures.

In its recent Malawi Economic Monitor, the World Bank also observed that financing of government fiscal deficits using high-cost domestic borrowing continues to drive domestic debt on an upward trajectory.

The bank fears that continued borrowing will further reduce fiscal space for development spending and risks crowding out private sector investment.

The post  Treasury closes Q3 with K192bn deficit first appeared on The Nation Online.

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