The World Bank says Malawi’s fiscal deficit is among the highest in Africa and a key driver of the country’s growing public debt, which analysts says is fast becoming unsustainable.

In its Africa Pulse for April 2023, the Bretton Woods institution said the fiscal deficit, which is the difference between government expenditure and revenues, is driving debt service upwards and increasing the fiscal burden.

The bank further said the fiscal deficit remains elevated, thereby creating additional pressure on the fiscal plan.

Reads the report in part: “There are countries identified as having significant twin deficit problems, notable cases include Malawi, Ghana and Nigeria with a fiscal deficit greater than five percent of gross domestic product [GDP] and a current account deficit higher than three percent of GDP.”

The report said the fiscal deficit, which widened to 5.2 percent of GDP in 2022 in the entire Sub-Saharan Africa region, compounded by sluggish growth, resulting in an increase in the public debt-to-GDP ratio at over 57 percent.

Meanwhile, in the current budget, Treasury has projected a fiscal deficit of K1.3 trillion, an equivalent of one third of the K3.87 trillion 2023/24 National Budget.

At K1.3 trillion, the fiscal deficit is 8.7 percent of GDP and below the recommended threshold of three percent.

The deficit, which counters one of the budget objectives of containing the deficit, is also coming on the back of rising public debt, now at K8.3 trillion as at December 2022, with interest payments pegged at K917.9 billion.

Speaking in an interview on Sunday, University of Malawi economics lecturer Lucius Cassim said the widening deficit was an unfortunate occurrence.

He also advised the Treasury to forgo things that are unnecessary expenditure and prioritises expenditures that grow the economy rather than bleed it.

“If we reduce borrowing, it means that we will also reduce the deficit,” said Cassim.

Meanwhile, Economics Association of Malawi has also expressed fears that the budget deficit is on the higher side, stressing the need for policies to contain the same

“We continue to have expenditure slippages on some lines, below projected revenue collections due to energy challenges facing industry,” said the Ecama in its budget assessment.

However, Minister of Finance and Economic Affairs Sosten Gwengwe said government continues to ensure that the fiscal deficit is minimised.

The post Fiscal deficit too high—World Bank first appeared on The Nation Online.