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Treasury borrowing ‘outside’ set target

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Sosten Gwengwe

Domestic public debt for the first nine months of the 2022-23 financial year is likely to hit K1.4 trillion in absolute terms, an amount almost double the overall annual target.

This year’s K2.8 trillion national budget was planned with a glaring K884.04 billion deficit or an equivalent of 7.7 percent of gross domestic product, of which K653.98 billion was meant to be covered through domestic borrowing.

But according to the government domestic borrowing plan from commercial banks, fund managers and other investors through Treasury notes and Treasury bills, among others, the borrowing levels could shoot beyond target.

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Figures contained in the recent Monthly Economic Report of financial advisory firm Bridgepath Capital show that from April [at the beginning of the financial year] to September 2022, the government borrowed about K779 billion domestically in absolute terms.

While the amount is already above plan, Treasury bills and Treasury notes issuance calendar for the last quarter of this year from the Reserve Bank of Malawi indicates that from this month to December, the government is expected to borrow an extra K630.7 billion through the securities.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said despite the amount being huge, it might drop in net terms.

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He said more needs to be done to ensure efficiency in public debt management.

“The budget was anchored on a lot of assumptions which have not been met because prices of goods and services have risen, which may be the main reason, and we are looking forward to the midyear budget review for some adjustments,” Tchereni said.

At K6.38 trillion, Malawi’s total debt is at 63 percent to the GDP of K10 trillion and if the current borrowing trends translate to net borrowing the country may see public debt rising to K7.78 trillion.

Minister of Finance Sosten Gwengwe did not respond to our Whatsapp message when asked to comment on the matter.

But when presenting the national budget, Gwengwe said his ministry will intensify efforts to refinance all expensive and near-maturing debt using cheaper debt to create fiscal space.

Gwengwe added that this will enable the government to have resources for financing exports enhancing projects such as those in the mining sector.

In a recent interview, the minister indicated that the government will work on reducing the budget deficit by 1 percent every year, thereby reducing borrowing, both local and foreign.

“We are mindful that there are pressures in this year’s economy because of inflation and other factors but the projected deficit for this year was lower and if we are disciplined enough to continue on that trajectory, we can have a sustainable way out of this accumulated deficit and debt,” he said.

Borrowing and debt repayment have been affecting the economy evidenced by the struggle for the government to secure an extended Credit Facility with the International Monetary Fund.

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