Malawi’s public debt stock rose by 5.1 percent during the fourth quater of 2017 to hit K2, 470.9 from K2, 352.0 billion recorded in the third quarter, latest figures from the Reserve Bank of Malawi (RBM) have shown.
According to RBM Financial and Economic Review for Fourth Quarter released on Friday, external debt stock rose by K47.1 billion or 3.3 percent to K1, 486.2 billion while domestic debt stock increased by 7.9 percent to K984.7 billion at the end of the quarter.
As a percentage of gross domestic product (GDP), total public debt stock rose to 52.8 percent of GDP in the quarter under review from 50.3 percent in the third quarter of 2017.
RBM said the ratio of external debt to GDP increased by 0.9 percentage points to 31.5 percent from 30.6 percent in the third quater.
“Major disbursements during the quarter came from the African Development Fund at $6.4 million, the Export Import Bank of China at $6.0 million and the International Development Association at $5.5 million.
“Other disbursements came from the Saudi Fund at $3.1 million and Opec Fund at $2.1 million. Debt from multilateral creditors accounted for 78 percent of the total external debt stock while bilateral debt constituted 22 percent as at the end of the quarter under review,” reads the review in part.
On growth of domestic debt, RBM report says Treasury notes held by RBM, Treasury notes held by foreign sector and Ways and Means Advances were the main contributors to the increase in debt stock in the fourth quarter Precisely, Treasury notes holdings by RBM increased by 9.3 percent from K477.7 billion recorded at the end of the third quarter of 2017 to K521.9 billion in the quarter under review. Foreign sector holding of Treasury notes increased by K11.4 billion to K14.3 billion and Ways and Means Advances increased by K29.4 billion to K43.7 billion in the fourth quarter of 2017.
“Consequently, Treasury bill holdings by RBM registered a decline of 55.9 percent due to maturity of instruments while Treasury bill holdings by corporate sector increased to K7.58 billion from K1.6 billion recorded in the previous quarter due to new issuances,” reads the economic review.
On distribution of domestic debt, the central bank said it continued to be the major holder of government debt accounting for 58.4 percent (K574.8 billion) of the total stock. This was 0.2 percentage points higher than the 58.2 percent (K531.5 billion) held in the third quater.
“A large proportion of this debt was held in RBM Treasury notes, which were at 53.0 percent of total domestic debt stock. On the other hand, commercial banks holding of domestic debt reduced to 18.7 percent from 20.7 percent of the third quarter of 2017,” the report said.
The growth in domestic debt stock comes less than a month after Finance Minister Goodall Gondwe told Parliament that Capital Hill does not have a growing appetitive for domestic borrowing.
Speaking when he presented the mid-year budget statement in Parliament last month, Gondwe said the indictment about the so-called appetite for domestic borrowing overlooks the fact that this government’s annual domestic borrowing has steeply declined from K94 billion in 2014/15 down to K37 billion in 2016/17 and to a planned figure of K28 billion in 2017/18.
“Surely, these figures do not reflect a government that has an appetite for domestic borrowing. After all, the rise in domestic borrowing was Cashgate, created problems including the donors’ withdrawal of budgetary support that reduced available resources to the budget by 10 percentage points.
“If the country was to continue with an acceptable level of social welfare, recourse to domestic borrowing was necessary to plug the whole. However, through yearly budgetary adjustments, this is being reduced aggressively…,” Gondwe said.