Advertisement
Business

Government home borrowing ‘affects reference rate’

Advertisement
Lauryn Nyasulu

Treasury’s unquenched thirst for domestic borrowing has moved reference rate—a benchmark for other rates—upwards, a development which has potential to rob Malawians of chances to access relatively cheaper loans in the interim.

According to published statements from some commercial banks in the country, the reference rate moved from 11.90 percent in March to 12.10 percent in April 2021.

Bankers Association of Malawi (Bam) says the interplay between borrowers’ demand for money and lenders supply of money has an impact on reference rate.

Advertisement

In an interview Wednesday, Bam Chief Executive Officer Lyness Nkungula said if a bank experiences greater demand for its loans relative to its supply of deposits, the reference rate tends to rise and some factors that drive the rate are overnight interbank borrowing rates and Treasury Bills.

“The government has borrowed from the domestic market during the past month, hence the slight reaction in increase for the reference rate as both T-Bills and interbank borrowing rates have also reacted [to] the same,” she said.

This entails the fruits of the policy rate slash by the Reserve Bank of Malawi (RBM) in November could be temporal if the trend does not change.

Advertisement

Some economists have been against the government’s insatiable appetite for borrowing, which they say could push potential private sector borrowers out of the equation.

In an earlier interview, Economics Association of Malawi President Lauryn Nyasulu said the government missed an opportunity to manage its domestic debt appetite and make some adjustments in the Mid- Year Budget review.

“In the next budget, there is a need to adjust accordingly because currently resources are tight and it is difficult for government to raise enough revenue with the economic challenges coming from the Covid pandemic,” she said.

Advertisement
Tags
Show More
Advertisement

Related Articles

Back to top button
Close
Close

Adblock Detected

Please consider supporting us by disabling your ad blocker