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Domestic debt jumps 8% in 3rd quarter

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Malawi’s domestic debt surged by 8.1 percent between July and September 2015 fueled by a more than six fold jump in outstanding Treasury Notes, the Reserve Bank of Malawi has said.

In its Financial and Economic Review for the third quarter, RBM says Malawi’s domestic debt closed the third quarter of 2015 at K490.0 billion or 15.3 percent of GDP, from K453.4 billion in the second quarter.

According to the report, outstanding Treasury Notes leapt from K5.7 billion in the second quarter of 2015 to K35.8 billion at the end of the third quarter.

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RBM says Ways and Means advances also more than tripled from a stock of K21.3 billion in the second quarter of 2015 to K72.6 billion in the quarter under review, a K20.0 billion or about 37.9 percent excess above the statutory limit of K52.7 billion.

However, the stock of Treasury bills closed the quarter at K242.3 billion from K282.1 billion in the preceding quarter, representing a 14.1 percent decrease, according to the report.

The report notes that the largest part of the domestic debt was held by commercial banks at 33.8 percent, followed by Reserve Bank of Malawi at 32.8 percent, and insurance companies at 15.9 percent of the domestic debt.

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Talking of external debt, the report says, in kwacha terms external debt increased by 10.5 percent and closed the third quarter at K924.4 billion from K836.6 billion in the second quarter of 2015.

However in United States dollar terms, external debt decreased from US$1.8 billion to US$1.6 billion in the quarter under review owing to amortisation made to creditors.

Multilateral debt accounted for 73.6 percent of total external debt, a drop from 76.6 percent in the preceding quarter, while bilateral debt accounted for 26.4 percent of the total external debt. The increase in kwacha terms therefore resulted from the quarter on quarter depreciation of the kwacha by 23.1 percent, according to the report.

The absence of donor support following a budgetary support freeze in November 2013 has left government struggling to meet its budgetary obligations, with the Malawi Revenue Authority also failing to meet its tax revenue targets.

The development has left Capital Hill with little to no option but to borrow on the domestic front in a desperate attempt to keep the wheels of the economy running.

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