Rédaction Africa Links 24 with Taonga Sabola
Published on 2024-04-19 08:07:47
Government borrowing from the domestic market through Treasury notes and Treasury bills in the first quarter of the 2024-25 fiscal year is expected to amount to K581.442 billion, as reported by The Daily Times based on the Malawi Government Local Debt Issuance Calendar released by the Reserve Bank of Malawi. This figure represents 48 percent of the total amount of K1.2 trillion that Finance Minister Simplex Chithyola Banda had previously stated the government would borrow domestically throughout the entire fiscal year to address the budget deficit.
The borrowing plan has raised concerns among economists, with Scotland-based economist Velli Nyirongo noting that front-loading a significant portion of borrowing in the first quarter could strain the country’s finances. Nyirongo warned that this approach could lead to higher interest rates, making it more expensive for businesses and individuals to access credit. Additionally, unexpected expenses later in the year could limit the government’s flexibility. Nyirongo emphasized the need for clarity from the government on why such a large sum is being borrowed upfront, especially as discussions on external debt forgiveness and restructuring continue while domestic debt levels remain a concern.
Despite these concerns, Secretary to the Treasury Betchani Tchereni reassured that the significant borrowing in the first quarter is necessary to honor maturing government financial securities held by financial institutions, fulfilling statutory obligations. Tchereni explained that moving forward, borrowing will be more standard to cover the government’s service delivery responsibilities once these maturing securities are addressed.
Supporting Tchereni’s perspective, Budget and Finance Committee of Parliament Chairperson Gladys Ganda affirmed that the borrowing is within the approved budget and part of essential government obligations. She emphasized the committee’s role in ensuring debt transparency, scrutiny, and accountability, with a focus on ensuring that interest rates on domestic loans are manageable or concessional.
Looking ahead, Ganda expressed confidence that the committee would closely monitor adherence to the Appropriation Bill and scrutinize domestic loans to ensure they align with government service needs. The goal is to maintain affordability and sustainability in borrowing practices while fulfilling the government’s service delivery mandates.
In conclusion, the government’s borrowing strategy for the first quarter of the fiscal year has sparked debate among economists and policymakers in Malawi. While concerns have been raised about the potential strain on the country’s finances and the impact on interest rates, government officials assert that the borrowing is necessary to fulfill statutory obligations and maintain essential service delivery. Moving forward, transparency, scrutiny, and accountability will be key in ensuring that domestic borrowing remains affordable and sustainable for the government’s operations.
Read the original article on The Times
