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Restore fiscal prudence—Nec
By
Ayam Maeresa - 04-04-2002 |
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The National Economic Council (Nec) has called on the govern-ment to restore financial prudence in the wake of worsening fiscal performance.
Nec said in its monthly economic report for February that the current fiscal funding problems were not a healthy development for the country’s reserve money targets.
Pressed for cash to finance its recurrent expenditures following delays in disbursements of donor pledges, government has been borrowing from the Reserve Bank of Malawi (RBM). Economic analysts say this is highly inflationary.
“The worsening of the fiscal performance indicates an urgent need for government to restore financial prudence. A tight monetary policy needs to be maintained in the short to medium term,” said the report.
It said in the long term government ought to include the implementation of expenditure control and revenue enhancement measures in order to come out of the quagmire.
Nec said government operations for February have not been in line with the resources raised during the month, a development that led to budgetary deficit of K1,336.867 million that was financed through borrowing from RBM.
Total revenue for the month under review, the report said, declined by K822.287 million to K2,434.563 million compared to January.
It said the Malawi Revenue Authority (MRA) was the main source depositing K1,260.123 million, representing 52 percent of the total revenue. The rest came from Treasury Bills and Department receipts, it said.
The report said continued delays in disbursement of pledged donor inflows put pressure on the gross official reserves and liquidity management. At 3.2 months of import cover in January, the reserves declined in February to 2.9 months, said the report.
“With this level of import cover, the liquidity situation need to be contained mainly through restoring fiscal prudence to reduce government borrowing,” the report said.
Last week, Finance and Economic Planning Minister Friday Jumbe said the economy has sunk to its lowest level ever as a result of unrealistic budgetary processes that over the years have created distorted expenditure patterns.
The current budget has severe slippage due to a decline of about K3 billion in domestic revenue, which he said came about due to the appreciation of the kwacha and changes in the import mix as a result of duty-free maize imports at the moment.
Recent talks with the International Monetary Fund (IMF) led to an agreement that government ought to streamline expenditure. |
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