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Bankers fault Covid for high government lending

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The Bankers Association of Malawi (Bam) has attributed high government lending to the Covid pandemic, which the association says has elevated government’s appetite for borrowing.

Bam President Mcfussy Kawawa said this in Blantyre over the weekend at the association’s dinner.

Kawawa, however, said the high levels of borrowing by government is unsustainable and hopes it is only short term and that banks would start channeling resources to production for the growth of the economy.

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“Our vision is to see how we can work together so that we channel more resources into major developmental initiatives that will have a lasting impact on the economy of the country,” he said.

Recently, it has been noted that banks are channeling more resources to government, which is considered more secure but less productive.

Malawi Confederation of Chambers of Commerce and Industry President James Chimwaza said in an interview that high government borrowing increases demand for cash and also crowds out private sector borrowers.

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“The solution is that government should be using borrowed money to purchase what the private sector is producing rather than spending the borrowed money on servicing debt,” he said.

Currently, public debt hovers at K4.1 trillion with more than half of it being domestic debt whose huge chunk was borrowed from the country’s banks.

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