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K345.5 billion government debt matures last quarter

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Leslie Fatch

The Malawi Government is expected to pay K345.5 billion in form of Treasury securities maturing between January and March this year, the last quarter of the 2022-23 financial year.

A financial market development report published by the Reserve Bank of Malawi (RBM) shows that the government is expected to pay K193.6 billion in January, K112.2 billion in February and K97.7 billion in March.

However, commercial banks are expected to pay RBM K56.8 billion in Open Market Operations (OMO) repos maturities and K351.8 billion in reverse repos during the same time.

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Financial Market Dealers Association of Malawi President Leslie Fatch said despite the reverse repos maturities, the development means liquidity will be injected into the market.

He was quick to cast doubt that the central bank will allow such liquidity to settle, saying it would be inflationary as money supply would increase on the market.

“Government is likely to borrow again this money as a way of controlling liquidity which will be injected because, if it will be left like that, there will be more liquidity on the market for people to borrow which, in turn, is inflationary to the economy,” Fatch said.

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Meanwhile, economist Murry Siyasiya has commended the government for responding to the problem of rising debt through debt sustainability strategies, stressing that it should ensure such strategies go hand in hand with economic developments.

He reiterated the need for the government to spend within its means to reduce borrowing in the long run.

“Inflation is rising, which means the government is expected to continue spending more, which will continue to subject it to borrowing. Therefore, it is important that the economy grows so that the tax base is widened and borrowing is reduced,” Siyasiya said.

During the mid-year budget presentation which Parliament passed last month, Finance Minister Sosten Gwengwe indicated that, in the last six months of the budget to March, government has allocated K381.8 billion for interest payments for loans both domestically and internationally.

He added that, overall, the provision for interest payments on debt has increased by K124.5 billion from the approved budget of K520.7 billion to K645.2 billion.

“The increase is on account of exchange rate adjustment due to the devaluation of the Kwacha and higher interest rates,” Gwengwe said.

Malawi’s total debt has increased to K7.3 trillion but government has indicated that it is working on a debt sustainability strategy to reduce the debt.

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