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Government credit down 41%

Net credit to the government from the monetary authorities decreased by K116.7 billion to K165.2 billion in December 2019, figures contained in a Monthly Economic Review by the Reserve Bank of Malawi (RBM) show.

This represents a 41 percent decline in public sector credit.

According to the report, the decline was entirely explained by RBM’s offloading of treasury notes amounting to K120.6 billion, which resulted in a reduction in the central bank’s holding of Treasury notes to K381.9 billion as at end December 2019.

It further shows that credit to the private sector increased to 21.3 percent in the month from 15.4 percent in November 2019. The figure, however, is 11.5 percent as compared to figures recorded in December 2018.

“On a monthly basis, private sector credit grew by 3.0 percent at K15.9 billion to K554.1 billion, supported by increases in commercial and industrial loans at K231.9 billion, foreign currency denominated loans at K133.1 billion, individual household loans at K174.3 billion and mortgages at K42.2 billion,” reads the report in part.

The development has excited economic experts who believe the government is no longer smooth out the private sector from the financial market.

Economic expert, Sane Zuka, said the private sector will be able to access finance for investment which may lead to the growth of the economy.

“Notwithstanding this positive outlook, it is important to analyse the specific sectors that have benefited from this gain. The spread in gains is particularly important in developing countries in order to reduce both risk and income inequality.

“Again, we do not really know how this has been achieved within tight government expenditure-dynamics. While it is true that offloading of treasury notes has resulted into this performance, it does not explain how government is balancing its overall expenditure demands,” Zuka said.

He added the performance within a short period may hide significant austerity measures in the social services sector, something that has long term negative effects.

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