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K455 billion domestic debt instruments mature in fourth quarter

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Cosmas Chigwe

Treasury securities worth K455.8 billion are expected to mature within the last quarter of this year, Reserve Bank of Malawi (RBM) figures show.

This means the government would be required to settle these debts, which it acquired domestically from commercial banks, fund managers and other investors through Treasury notes and Treasury bills.

According to a recent RBM Financial Market Development report released on Wednesday, this month alone, the government will have to foot debts worth K248.8 billion.

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The Treasury is expected to pay back debts valued at K112.6 billion in November and K94.4 billion in December.

Market analyst Cosmas Chigwe said the situation means the government will inject a lot of liquidity into the market.

He added that the government will, therefore, have to find alternatives of tightening the monetary policy to arrest possible inflationary pressures.

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“With the period that we are in, monetary policy, has to be aligned with fiscal policy, which means that it has to be tightened a little bit. Therefore, RBM will have to take out some liquidity through means like OMO repos or other borrowing,” he said.

However, this may be offset with government plans to borrow K629.9 billion during the same period through the issuance of Treasury notes and treasury bills.

According to the issuance calendar, between October and December, the government will borrow K353.8 billion through Treasury bills and K276.1 billion through Treasury notes, whose maturity period ranges between two and 10 years.

In its recent Economic Review, advisory firm Bridgepath Capital Limited says, in September, the Treasury bills auction had a rejection rate of 13 percent while the Treasury Notes auction had a nil rejection rate.

The average Treasury Bills yield increased to 15.08 percent from 14.94 percent in August 2022 and the average Treasury notes yield increased to 24.70 percent from 24.55 percent during the period under review.

“The government awarded a total of K166 billion in the month, a decrease of 16 percent from a total of K197 billion in August 2022 awarded through Treasury bills and Treasury notes auctions,” reads the report.

Treasury officials were not immediately available for a comment but in a recent interview, Minister of Finance Sosten Gwengwe said the government was working towards cutting the budget deficit by 1 percent each financial year, hence, expected to continue narrowing the level of borrowing.

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