Of K600.1bln projected to be collected in first half of the financial year, K564.2bln has been achieved

Finance Minister Felix Mlusu

* Representing 94.0% of the target

* Domestic revenue collection was projected at K1.179 trillion

* As Finance Minister presents the 2020/2021 mid-year budget review

* This has been achieved in the hardest of times characterised by subdued economic activity due to COVID-19 pandemic

By Duncan Mlanjira

At the time of budget formulation of the 2020/2021 fiscal year, it was assumed that policy measures and strategies by the Government would result into domestic revenue collection of K1.179 trillion.


Of this amount, K600.1 billion was projected to be collected during the first half of the financial year. However, at the end of the first half, total domestic revenue collection amounted to K564.2 billion, representing 94.0 percent of the target.

For taxes, actual first half collection amounted to K548.7 billion, representing 96.5% of target.

This revenue performance has been achieved in the hardest of times characterised by subdued economic activity due to COVID-19 pandemic.

This is what Finance Minister Felix Mlusu presented in Parliament on Friday as he begged to move the mid-term revised estimates on the Recurrent and Development Accounts for the 2020/2021 Budget to be reviewed by the Committee of the House, to be considered vote by vote, and that thereafter it be adopted.

On the expenditure side, Mlusu said during the first six months of the fiscal year, Government expenditures were over and above the target of K974.6 billion by 2.5% and again — among other factors — “this is on account of the unforeseen expenditures towards COVID-19 pandemic management and re-administration of the Malawi School Certificate of Education Examinations”.

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He added that the performance of the budget in the first half as well as projected outturn for the second half have necessitated an upward revision of the expected net domestic borrowing requirement from K530.4 billion in the approved 2020/2021 fiscal budget to K564.4 billion, or 6.1% of GDP in the revised budget.

On the world and regional economic outlook, Mlusu said according to the January 2021 World Economic Outlook Report by the International Monetary Fund, global economy is projected to grow by 5.5% in 2021 and 4.2% in 2022, though amidst exceptional uncertainties.

“These projected growth recoveries are fresh on the back of a severe collapse in 2020 that was recorded at minus 3.5%. The 2021 forecasted growth rebound reflects expectations of a vaccine-powered strengthening of economic activity later in the year and additional policy support in a few large economies.

“However, the strength of recovery is projected to vary significantly across countries, depending on access to medical interventions, policy effectiveness and exposure to cross- country spill over effects.”

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He added that I n Sub-Saharan Africa, growth is expected to pick up from minus 2.6% in 2020 to 3.2% in 2021 and 3.9% in 2022, saying big economies of South Africa and Nigeria are forecasted to grow by 2.8% and 1.5%, respectively.

On the economic development in Malawi, the National Statistics Office completed the rebasing exercise of the country’s GDP, saying real GDP is now based on 2017 prices and not on 2010 prices as was the case when he formulated the 2020/2021 fiscal Budget.

“The rebasing exercise resulted into an increase in the country’s GDP of about 37% in 2017. This follows the Census of Economic Activities that was conducted and resulted into addition of more economic units into the GDP calculation basket and also removal of some companies that no longer exist.

“It is therefore important to remember that economic growth rates presented in this revised budget are based on 2017 prices and that all reported ratios to GDP are based on the nominal GDP that is higher and much more reflective of the current economic situation.”

Malawi Parliament

Mlusu added that the latest figures indicate that in 2020, the Malawi economy grew marginally by 0.9% and that this is a downward revision from 1.9% growth rate estimate that was used during the 2020/21 budget formulation.

“This economy, Madam Speaker, continues to suffer from the adverse effects of the coronavirus pandemic which compelled Government to impose containment measures, including partial lockdown and restrictions on mobility.

“Internationally, Malawi’s economic activities have been hampered by border closures in neighbouring countries as well as containment measures in major trading partners such as South Africa, Europe and China.”

Going forward, Mlusu disclosed that a preliminary GDP growth rate for 2021 is forecasted at 3.5% and that this is largely on account of the normal to above normal rains that this country has received so far, although localised dry spells are being experienced in some districts mostly in the southern and eastern regions of Malawi.

Appeal from Sandra Sharon Kamanga

“Growth in 2021 will also be significantly bolstered by the expected increase in agriculture output due to the impact of AIP.

“Enhanced growth prospects in 2021 are also buttressed by the on-going Government infrastructure development projects in the road, energy and agriculture sectors, most of which are growth enablers.

“Furthermore, Madam Speaker, just as in many other countries, the COVID-19 vaccine is also expected to spur business and economic confidence. It is however, important to remember that economic growth in 2021 and beyond is dependent on how fast the second wave of the pandemic dissipates.

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“Annual headline inflation in 2020 was registered at 8.6%, a marked drop from 9.4% recorded during 2019. Food inflation at 13.1% for 2020 continued to dictate developments in headline inflation, although a noticeable moderation was recorded from 14.3% in 2019.

“Meanwhile, Madam Speaker, non-food inflation has been oscillating around 5.0% since the beginning of 2019, and recorded at 4.9% in December, 2020, thereby averaging 4.7% in 2020 and lower than 5.4% registered in 2019.

“Going forward, annual average headline inflation for 2021 is projected at 7.4%, with a December 2021 inflation projection of around 7.0%.”

He announced that the country’s trade balance continues to worsen as at end December 2020, trade deficit widened to US$566.7 million from US$352.8 million recorded during the same period in 2019.

“This is mainly on account of increased imports of items for COVID-19 management as well as strategic commodities such as fertiliser under the Affordable Inputs Program.

“As at end December 2020, Gross Official Reserves stood at US$574.3 million, representing 2.8 months of imports, down from US$846.6 million (4.1 months of imports) recorded in December 2019.

“Consequently, the Malawi Kwacha exchange rate against major trading currencies during the year 2020 experienced some depreciation pressure. From June 2020 to December 2020, the Malawi Kwacha depreciated by about 5.0% against the United States dollar,” Mlusu told the august House.

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