Malawi Government’s June 2013 net domestic debt rose by 17 percent to K151.9 billion from K129.5 billion in May, indicates the Reserve Bank of Malawi (RBM) monthly economic review.
The RBM report released last week notes that net domestic credit—government and private sector combined—rose by about eight percent to K401.5 billion in June from K371.3 billion in May.
The review, however, notes that private sector net credit shot up by only 3.8 percent to K231.8 billion while net credit to parastatals dropped by K852.9 million in the month.
“[Net credit to government] increase emanated largely from net lending from the monetary authorities which increased by K23.8 billion, but was somewhat offset by a K1.4 billion reduction in net borrowing from the commercial banks.
“Government’s net borrowing from the commercial banks dropped to K42.2 billion in June 2013 from K43.6 billion recorded in the previous month. The decrease represented the net effect of a K2.3 billion treasury bills maturity and K988.6 million drop in government deposits at the commercial banks,” reads the report in part.
The report further notes that the upsurge in the private sector net debt was observed across all sectors except for personal loans that dropped due to tight lending conditions.
RBM added that loans to the commercial and industrial sector grew by K5.3 billion, the bulk of which was for working capital purposes.
However, RBM spokesperson Mbane Ngwira, responding to a questionnaire on Saturday said the increase was due to transactions that occurred during the month of other financial instruments between the monetary authorities.
“Net credit to government actually decreased during the quarter from K153.2 billion in March 2013 to K151.9 billion in June 2013 indicating an overall decline which is consistent with the monetary policy being pursued. This is a better indicator of the impact of government credit. This decrease in net credit to government coupled with a slower growth in private sector credit, resulted in a decrease of money supply growth which is the target of monetary policy,” said Ngwira.