By Kingsley Jassi:
Latest Financial and Economic review by the Reserve Bank of Malawi (RBM) has shown that budget operations during the first six months of 2024-25 fiscal year had a K1.18 trillion cumulative deficit following a K2.95 expenditure.
In the six months period between April and September, total revenue, including domestic collections and foreign grants, reached K1.77 trillion.
However, quarterly figures show that the Treasury slowed down spending in the second quarter of the current fiscal year between July and September, when total expenditure dropped by K200 billion to K1.38 trillion from K1.57 trillion in the first quarter between April and June.
The report released this week shows grants and non-tax revenue declined in the second quarter while tax collections increased to K786.8 billion from K643.6 billion in the previous quarter, totalling K1.43 trillion in the six months period.
“Total revenues were estimated at K872.3 billion. This represents a 3.3 percent decline from the K901.8 billion recorded during the preceding quarter,” the central bank reports.
It further explains that the decrease followed a K163.7 billion decline in grants collections to K76.4 billion during the quarter and a K9 billion decline in non-tax collections to K9.1 billion.
On the expenditure side, the decline was on account of a K120.5 billion decrease in recurrent expenditures to K1.09 trillion and a K79.5 billion decline in development expenditures to K289.7 billion.
“The decline in recurrent expenditures was driven by, among others, the lower purchase of goods and services and lower pensions and gratuities amounting to K130.2 billion and K51.2 billion from K147.2 billion and K60.5 billion, respectively,” the report says.
It further reads that development expenditures decreased following foreign-financed projects funds that declined by K96.5 billion to K183.8 billion from K280.4 billion in the previous quarter.
The Minister of Finance is expected to present a mid-year budget statement amid perceived fiscal pressure with calls for expenditure cuts as President Lazarus Chakwera directed the Minister to incorporate austerity measures in the budget.
“This year’s review will be very critical but daunting,” said one economist Lesley Mkandawire. “The economy is in very bad shape both on the external and domestic fronts. Being a predominantly import dependent economy (sadly for consumption), with scarcity of forex, the budget review upwards will be huge.”
He said inflation has already put the budget off balance and to implement it without removing some allocations would need substantial borrowing.
Malawi Economic Justice Network Executive Director Bertha Phiri said implementation of the 2024-2025 National Budget has been problematic with most spending entities receiving sporadic funding which is not in line with their approved cash flows.
“In some instances Local Councils have gone two to three months without funding, a thing which continues to compromise quality public service delivery,” said Phiri in a written response.
She further said the fiscal authority needs to rise to the occasion by being prudent enough with the little at their disposal.
She added that there is so much spending on consumption than investment pushing up debt to unsustainable levels.
“The expectation is to see a downward revision of the budget from the initial 2024-2025 one with serious re-alignment and prioritization on essential spending,” she said.
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