Reserve Bank of Malawi (RBM) Governor Wilson Banda has rated as ideal the Treasury’s strategy to reduce domestic borrowing, saying the move would help free up resources to be channelled to the private sector for growth.
He was reacting to the 2022-23 National Budget Statement which was presented to Parliament recently by Finance Minister Sosten Gwengwe.
The budget hinges on reducing public debt stock, seen at K5.5 trillion as at mid-2021.
Gwengwe said the government intends to stabilise debt creation processes and embark on a downward debt trajectory in subsequent budgets.
“This will allow the private sector to invest, and it allows the private sector to use those resources instead of government consuming them,” Banda said.
He said Malawians should expect the creation of more jobs and more economic activities.
According to the governor, when government borrows heavily, much of the money is used for consumption.
He said the 2022-23 National Budget is one of the best ever as it is crafted in a way that it facilitates reduction of public debts.
“This is a very bold step by government in order to resolve unsustainable debt,” Banda said.
Meanwhile, Oxfam has said the budget presents an opportunity for the government to invest in systems that will help fix weak public finance management systems as well as public service systems.
Oxfam Country Director Lingalireni Mihowa, however, lamented the elevated fiscal deficit—projected at K884.04 billion— which she said remains beyond the internationally acceptable level of 3 percent of gross domestic product.
“A well-functioning PFM system can and will be vital to attract additional donors that are willing to use national systems thereby reducing the deficit.
“We commend the government for the PFM reforms introduced in the 2022-2023 Budget such as introduction of expenditure control measures and the reforms to strengthen financial oversight over State-owned enterprises” Mihowa said.