The government has cumulatively raised approximately K1.1 trillion through treasury notes in about 21 bonds on the Malawi Stock Exchange (MSE) for debt financing.
MSE Chief Executive Officer John Kamanga has since described the move as a positive sign that the market has vast potential.
Kamanga said the option increases the product portfolio that people can invest in on the local bourse while giving a signal to potential insurers.
“It is going to provide an avenue to the investing public that those who may not be in a position to invest in the equity can participate on the bond market and they are offering good returns of up to 20 percent which means that the investment public will benefit,” he said.
Business Times understands that the money whose tenor ranges from 2 years to 10 years will be used for debt financing.
Kamanga encouraged government entities to raise funds through the market, indicating that it has a lot of multiplier effects on the economy.
Minister of Finance Sosten Gwengwe said as much as it is important to raise funds through the stock market, affordability concerns are what pushes the entities backwards.
He said sometimes it is considered that borrowing from international lenders is cheaper than the domestic market which makes the parastatals to shun the local market.
“Government funds ought to be protected and not spent anyhow, that is why every time government entities want to borrow they scrutinize and find cheaper means of borrowing,” he said.
This comes amid a red flag raised by the International Monetary Fund (IMF) that the country’s debt has hit an unsustainable level.
The fund has set out debt sustainability policies as the main condition if Malawi is to convince them for an ECF.
In the fund’s statement, the IMF mission chief Mika Saito hinted that the fund is not impressed with how Malawi wants to manage its debt which has reached unsustainable levels.
“To complement their strong reform program, the authorities are implementing a comprehensive debt restructuring needed to restore debt sustainability. A credible process for the debt restructuring needs to be underway prior to the IMF Executive Board’s consideration of Malawi’s request,” Saito said.
Malawi’s debt currently is at K6.35 trillion representing 63 percent of the gdp which is above the IMF recommended level of 60 percent.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.