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Treasury raises K15 billion through note

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Thom Khanje

The domestic market is still seen as ‘lucrative’ source of government debt amid concerns, by some experts, for what they call insatiable appetite for borrowing.

Results of Malawi government 5-year Treasury note auction held on June 1 for instance show that the government raised K15.17 billion from the private sector.

The figures that show that government will have to foot more than K4 billion in interests and pay the lenders K19.75 billion after the loan’s maturity in 5 years.

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Presenting the 2021/22 National Budget a week ago, Finance Minister Felix Mlusu said developments in revenues and expenditures are projected to amount to a fiscal deficit of K811.7 billion, representing 8.8 percent of GDP whose huge chunk will be financed by domestic borrowing.

“This deficit is on account of a number of factors including the subdued revenue performance, expenses in response to Covid pandemic and the significantly high proportion of mandatory expenses. The deficit will be financed through foreign borrowing at K246.3 billion and domestic borrowing at K565.4 billion, or 6.1 percent of GDP,” he said.

Economists have been advising government to find cheaper and sustainable means of financing the budget as opposed to domestic borrowing.

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Oxfam Country Director Lingireni Mihowa said the cost of borrowing domestically is very high and needs to be watched before the debts become unsustainable.

Malawi 2063 which is a blueprint for the country’s development championed by National Planning Commission (NPC) aims at among others reducing government’s appetite for borrowing by making the country an inclusively wealthy and self reliant nation by 2063.

NPC Communications Specialist Thom Khanje said for now government should look at various innovative models of financing national development projects other than borrowing.

“These include but are not limited to public private partnerships, Build, Operate and Transfer, pension funds, bonds, venture capital, contracting, grants and concessional loans among others,” he said.

Malawi’s debt has been on the rise hitting over K4 trillion by early this year which is double the national budget.

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