Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe has faulted Treasury and legislators for being responsible for the country’s soaring debt which is affecting the management of the country’s economy.
The governor’s statement comes as Parliament, through the Financial Services (Amendment) Bill, wants to cap government borrowing through Treasury bills (T-bills), at a time public debt has peaked at K3 trillion, which is double the 2018/19 K1.5 trillion National Budget.
Speaking on the sidelines of the meeting with the joint parliamentary committee on the Bill in Lilongwe on Thursday, Kabambe said the proposal pertains to the amendment need for Public Finance Management Act and not Financial Services Act provisions as it relates to government borrowing either from the central bank or on the market.
He said: “Technically, borrowing itself is a matter which is really for Parliament and Treasury because Parliament debates and dictates what Treasury borrows in a particular year as it approves the budget.
“When government is borrowing, the Reserve Bank of Malawi is simply asked to borrow on its behalf through Treasury bills. What normally happens is that once an amount has been decided for borrowing, then it is auctioned and any bidder that gives the best rate is the one who gets an allotment, so capping the Treasury bills will complicate the bidding process for a better rate.”
The Financial Services Act(Amendment) Bill popularly known as Interest Rates Capping Bill seeks to fix the rate at two percent above inflation if inflation is less than 10 percent and at 10 percent if inflation is above 10 percent.
Chairperson of the Budget and Finance Committee of Parliament, Rhino Chiphiko, in an interview yesterday agreed that Treasury and Parliament are to blame on rising debt levels.
He said: “The governor is right in a way because when we scrutinise the budget, there are certain figures that Parliament do not pay attention to, one of them is borrowing. So, he is right in a way to blame Parliament because we approve this kind of borrowing.”
Chiphiko faulted the Public Finance Management Act (PFMA) for being weak, saying it cannot stop borrowing, because government does not come to Parliament to seek approval for local borrowing.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said in an interview yesterday the governor was just being honest with the facts.
He said as Ecama, they think Malawi can achieve stability if the fiscal side is also conforming to macroeconomic fundamentals which include restraint on borrowing merely for consumption.
Treasury officials could not be reached for a comment on this issue.