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Pressure on budget sees deficit rise to K3 billion
By
Abel Mwanyungwe - 11-06-2002 |
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The pressure on the budget increased by 40 per-cent in March 2002 when the budget deficit rose to K2.759 billion compared to a deficit of K1.957 billion in February.
A market analysis report compiled by Loita Investment Bank said the deficit is being experienced at a time when government is collecting low revenues.
“This reflects a significant increase in expenditures in the current environment of decreasing revenues. Expenditures at K4.79 billion increased by almost 25 percent from K3.843 billion in February 2002 while revenues, at K2.03 billion increased by only 7.7 percent,” Loita said in its report released yesterday.
The Reserve Bank of Malawi (RBM) Monetary Committee said government used proceeds from Treasury Bills (TBs)—instruments used by government to borrow from the public—and overdrafts from the central bank to finance the shortfall.
However, analysts worry that such type of financing could put pressure on the money supply and force the central bank to intensify mop-up exercises.
“The short and medium term effects of this could culminate into rising interest rates which could unfortunately reverse the downward trend in yield rates noticed during the recent auction of RBM and Treasury bills.
RBM data shows that government, in trying to rein in against domestic debt, further reduced the amount of TBs required to K300 million from K500 million.
The reduction in the borrowing led to the downward trend in yield of TBs. At the May 31 auction, the yield rates for the 91-day and 182-day bills decreased to 45.5 percent from 45.86 percent and 45.52 percent from 45.92 percent.
“Government promises to check slippages in expenditures in the new fiscal budget could sustain the downward trend in yield rates in the short and medium term,” Loita said in its analysis.
On the exchange market Loita said the kwacha has, since April this year, maintained a stable value against the United States dollar and the Zimbabwe dollar.
Currently, the mid-rate is at K75.85 to one US dollar and K1.40 against one Zimbabwe dollar.
According to Loita, the satisfactory performance of South Africa’s gold exports, with rising commodity prices, has seen the South African Rand maintain an edge against the kwacha.
The official exchange rate increased to an average K8 to one Rand from K7 in April this year. |
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