Finance Minister Goodall Gondwe says government has slowed down on domestic borrowing from the rate of K50 billion in the lastfinancial year to around K6 billion in December 2015.
Gondwe told Point Blank television programme on Times Television onTuesday that Capital Hill intends to completely halt domesticborrowing by June this year.
“This is a tremendous adjustment and we are doing something about it.At the time when the International Monetary Fund said that we were offtrack, that was withrespect to the financial year of 2014-2015 up to June but from July upto now, we have done a tremendous amount of adjustment and the resultis that we are borrowing much less now,” said Gondwe.
High levels of domestic borrowing by government over the years havemounted pressure on interest rates, resulting in the crowding out ofprivate investment.
Currently, Malawi’s policy rate is at 27 percent, meaning thatMalawians have to cough interest of around 40 percent per annum toborrow from commercial banks.As at 30 June 2015 domestic debt totaled K425 billion while foreigndebt totaled K829 billion (US$1.25 billion).
Gondwe was quick to point out that the move to reduce domesticborrowing in the absence of budgetary support will have a significantimpact on service delivery by the state.
“We will have to adjust our expenditure as some services will probablynot be offered to the public, no doubt about it.
“We may have to look at a number of things where we will need to makesome cuts and we are looking at the budget right now,” said Gondwe.
He was, however, elusive on what he and his compatriots in the cabinetare willing to give up as part of leading by example in the sacrificeprocess.
Over the years, analysts have blamed authorities of punishing thepoorest of the poor by denying them vital services in the name of‘tightening the belts’ while the presidency and Cabinet have continuedto live in extravagance.