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Domestic debt eases in second quarter

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Betchani Tchereni

Government domestic borrowing decreased in the second quarter of 2021 to K202.25 billion from K438.50 billion during the first quarter.

Figures contained in the 2021 Second Quarter Economic Review from CDH Investment Bank show that, during the period under review, the government raised K30.58 billion in auctions of Treasury bills (TB) and K171.67 billion in auctions of Treasury notes (TNs).

During a similar period last year, the public debt was seen at K308.86 billion.

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The review added that total applications for TBs during the period amounted to K31.91 billion, representing a rejection rate of 4.16 percent, which is higher than the rejection rate of 3.57 percent in the first quarter of 2021 but lower than the rejection rate of 33.31 percent during same period last year.

Looking ahead, the bank expects yields of government securities to remain elevated in the short term as far as government domestic borrowing needs remain high and Reserve Bank of Malawi continues to pursue a cautious monetary policy in the face of high risks associated with Covid.

“In the long term, however, a possible policy rate cut when macroeconomic conditions improve, and aimed at supporting economic recovery from effects of Covid, could lead to a decrease,” the report reads.

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Economists and businesses have been advising government to curb its appetite for domestic borrowing, describing it as expensive and not healthy for the economy.

Commenting on the figures, economist from the Malawi University of Business and Applied Sciences Betchani Tchereni attributed the drop in public debt to a peak up in the agricultural marketing season.

He urged the government to purposefully work towards taming its appetite for borrowing.

“High domestic borrowing negatively affects the economy, in terms on inflation and interests rates for example. Therefore, if this reasonable borrowing can continue, it will be good for the economy,” he said.

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