Weekly treasury bills (T-bills) volume, a type of government securities have risen by more than 260 percent to K4 billion ($10m) since week ending January 10, available data indicate.
However, according to the statistics provided by the Reserve Bank of Malawi (RBM), T-bill yields have been declining over the period, an apparent indication that applications are out-stripping announced amounts.
The data indicates that in the week ending January 10, RBM raised about K1.1 billion (about $2.7m) with an average yield of 36.8 percent. The volume however rose to K2.5 billion (about $6.2m) in the week ending January 31 before hitting K4 billion in the week ending February 14. In the week ending Feb 7, the yield dropped to an average 21.8 percent.
In a press statement released prior to the T-bills auction sale, the RBM notified the general public that government would raise K4 billion to finance maturing debt.
Earlier the International Monetary Fund (IMF) projected that domestic borrowing would increase slightly between October and December followed by repayments from January to June.
The fund noted in Malawi’s country report released this month noted that excessive borrowing between July and September limited the scope for additional domestic borrowing to offset the shortfall in external funding.
Recently the Malawi Confederation of Chambers of Commerce and Industry
(MCCCI) chief executive officer Chancellor Kaferapanjira cautioned that government borrowing from the domestic market is driving interest rates up and crowding the private sector out.
Kaferapanjira warned that the prevailing high interest rates are bound to choke most businesses and consequently stifle private sector investment, thereby constraining economic growth.
Interest rates jumped by about two percentage points to over 40 percent early January this year.
In the wake of decisions by the country’s major donors to withhold aid, experts and businesses have pointed out that the aid freeze may trigger government domestic borrowing, push interest rates and further worsen the depreciation of the kwacha.
However, in a press statement issued in November and signed by the RBM Governor Charles Chuka, the central bank said to rein in inflation, RBM will continue with its tight monetary policy stance through the use of open market operations, bank rate, and foreign exchange operations.
Regardless of the tight monetary policy, liquidity levels have increased during the week ending February 7 averaging K16.11 billion (about $40m) a day from a daily average of K5.55 billion (about $13.8m) in the previous week.