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Experts skeptical on austerity measures

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Ben Kalua

A suggestion that the government should consider implementing austerity fiscal measures by among other things reducing borrowing as a step towards economic recovery has attracted mixed views.

In its April monthly newsletter, Malawi Stock Exchange-listed National Bank of Malawi (NBM) plc says introducing fiscal austerity during a pandemic period, which is threatening growth prospects and employment, may prove disastrous.

“Policy makers are unlikely to succumb to pressure from economic commentators to curb borrowing. Policy makers are perhaps drawing lessons from the 2008 financial crisis of the damaging effects emanating from early withdrawal of stimulus,” NBM says in the report.

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In an interview Monday, Chancellor College-based economics professor Ben Kalua said the option could not be practical in the interim.

He said Treasury should instead consider setting a ceiling beyond which it should not go in filling the existing fiscal deficit through debt.

Public debt stock stands at K4.13 trillion which is 54 percent above the country’s gross domestic product and two times higher than the K2.3 trillion 2020/21 National Budget.

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The African Institute for Corporate Citizenship (AICC), a non-governmental promoting the role of business in development, says doing away with public debt could be a long term aspiration.

AICC Chief Executive Officer Felix Lombe said in the interim, the country should work towards prudent management of the available resources.

He, however cautioned the government to desist from borrowing for consumption.

Malawi’s debt levels have forced government to start pondering on establishing a debt retirement fund.

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