Government is expected to borrow K581.442 billion from the domestic market through Treasury notes and Treasury bills in the first quarter of the 2024-25 fiscal year, The Daily Times has established.
This is according to the Malawi Government Local Debt Issuance Calendar released by the Reserve Bank of Malawi.
The K581.442 billion is 48 percent of the total amount of K1.2 trillion that Finance Minister Simplex Chithyola Banda indicated that government would borrow from the domestic front in the entire 2024-25 fiscal year to fill the budget deficit.
Commenting on the development, Scotland-based economist Velli Nyirongo said government’s borrowing plan is causing some alarm.
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Nyirongo said by front-loading a significant portion of its borrowing in the first quarter, the country’s finances are under strain.
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“This situation could result in higher interest rates, making it more costly for both businesses and individuals to borrow money. Moreover, if unexpected expenses arise later in the year, the government may find itself with limited flexibility.
“Malawians are rightfully seeking answers from their government: Why borrow such a large sum upfront? While the government discusses external debt forgiveness and restructuring, growing domestic debt remains a cause for concern,” Nyirongo said.
But Secretary to the Treasury Betchani Tchereni Thursday said the huge chunk of borrowing in the first quarter should not be a cause for worry.
Tchereni said, in the first quarter, there are a number of government financial securities—which financial institutions bought from government—which are maturing.
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“It is this maturity which needs to be honoured because it is [part of] statutory obligations.
“Going forward, there will not be a lot of maturities, such that government will be borrowing normally to simply cover the responsibility of service delivery,” Tchereni said.
Budget and Finance Committee of Parliament Chairperson Gladys Ganda concurred with Tchereni, saying the borrowing is part of the approved budget.
She said the role of her committee is to ensure that there is debt transparency, scrutiny and accountability.
“The issuance should not worry anyone. During this quarter, a number of securities are maturing, which necessitates that the obligations be met. We hope that, in the following quarters, the borrowing will be normal to cover the needs of government in its provision of services
“The Budget Committee will ensure that the Appropriation Bill is strictly adhered to. As alluded to, where possible, domestic loans scrutiny needs to be done to ensure that the interest rates are affordable or concessional,” Ganda said.
