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Budget deficit rises again
By
Ephraim Munthali - 18-06-2002 |
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Pressure on the budget has again increased public deficit to K2.93 billion in April compared to K2.759 billion in March this year, minutes of the Reserve Bank of Malawi (RBM) Monetary Policy Committee (MPC) reveal.
The minutes, published yesterday, also say government revenue during the month of April amounted to K2.57 billion against total expenditures including external and domestic debt of K338.7 million and K1.633 billion, respectively.
But the central bank said government financed its deficit through borrowing using Treasury Bills—instruments used by the central government to borrow from the public and advances from RBM.
The import cover is in decline and in sharp contrast to an equivalent of 5.6 months cover recorded in May last year.
Loita Investment Bank warned last month the low import cover, if it does not improve, could lead to the depreciation of the kwacha.
The low levels have been compounded by unstable circumstances pervading tobacco crop marketing which has been characterised by cross border smuggling and erratic prices at the auction floors.
The situation has also been made worse by the delayed and suspended disbursement of foreign assistance.
“The increase was mainly on account of purchased foreign exchange from the market. The overall banking system held reserves equivalent to 3.5 months of import cover compared to 3.1 months in March,” the RBM said.
MPC also said net domestic credit extended by the banking system increased by five percent to K15.468 billion during the month of April compared to an increase of 9.8 percent in March.
But the committee decided to maintain the bank rate—the rate at which commercial banks borrow money from RBM—until when there is a sustained downward trend in government domestic borrowing.
“It was observed that a reduction in the bank rate would lead to excessive monetary expansion unless that reduction was preceded by a fiscal contraction sufficient to begin cutting back domestic debt stock.
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