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Govt commits to new RBM law on borrowing

Director of debt and aid in the Ministry of Finance, Economic Planning and Development Peter Simbani has said government is committed to align its domestic borrowing levels to the new Reserve Bank of Malawi law passed in Parliament on Monday.
The new law, called Reserve Bank of Malawi (RBM) Amendment Act, among others, limits government’s borrowing from the central bank from the previous 20 percent of total revenue.
The new law further prohibits government from extending the loan repayment period.
The Act was earlier presented during the previous meeting of Parliament by Finance Minister Goodall Gondwe, but the Budget and Finance Committee of Parliament suggested some amendments into the bill which were subjected to an intense debate before they were incorporated.

Chuka and Gondwe want the economy back on track
Chuka and Gondwe want the economy back on track
And speaking Wednesday in Lilongwe on the sidelines of the launch of the World Bank’s Malawi Economic Monitor (MEM), Simbani said government is very committed to ensuring that the domestic debt is reduced.
“With this new law in place, I can assure you that government is committed that our borrowing from the central bank is limited to 10 percent and not anything beyond that,” said Simbani.
In recent financial years, government has resorted to huge domestic borrowing from the central bank as a desperate move to finance a huge fiscal gap created by the suspension of budget aid by donors in 2013 following Cashgate.
Huge domestic debt stock has been blamed for partly fuelling inflation rate-currently in double digit at 18.2 percent, and consequently crowding out most private sector players out of business.
“Am sure that there is also external scrutiny out there such as the Budget Committee of Parliament and other organs which will also help this government reduce domestic debt which is now very high,” added Simbani.
Member of Parliament (MP)for Salima Central Felix Jumbe, who also attended the meeting, blamed government borrowing, high interest rates and volatile exchange rates on over-expenditure and asked the World Bank to help monitor the situation.
Said Jumbe: “Limiting government borrowing to 10 percent will help reduce interest rates and this is what everyone wants, but we are very skeptical as to whether government will really abide by this law looking at the current economic situation.”
Chairperson of Budget and Finance Committee of Parliament Rhino Chiphiko said on Monday that MPs expect that authorities will respect provisions of the new law.
Chiphiko complained that huge government borrowing has over the years strained taxpayers apart from the Executive asking government to extend period of loan repayment.
Current total public and publicly guaranteed debt as at end 2014 is at $2.59 billion, which is 69.6 percent of the country’s gross domestic product (GDP).
Gondwe is expected to present the 2015/16 national budget today which, among others, will spell out government direction in ensuring that both domestic and external debt is reduced.

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