The tight liquidity conditions on the domestic market have hit government securities auctions as evidenced by their continued under-allotment relative to planned issuance on Treasury securities auctions for the 2021/22 fiscal year, figures show.
The Reserve Bank of Malawi (RBM) figures show that Treasury last week raised to K29 billion against total subscription amounting to K31.3 billion, planned issuance of K55.6 billion and Treasury securities maturity totalling K61 billion.
Treasury bills (T-bills) allotment was 97 percent of subscription and 102.7 percent of planned issuance while Treasury notes allotment was 89 percent of subscription and 35.7 percent of planned issuance.
This means that cumulatively in 2021/22 fiscal year, Treasury securities allotment stands at 82.7 percent of subscription and 38.6 percent of planned issuance as per the issuance calendar.
Commenting on the development in an interview yesterday, Bridgepath Capital Limited chief executive officer Emmanuel Chokani said this is a true reflection of the liquidity situation on the market.
“Liquidity is tight currently on the market. For instance, the discount window borrowing was around K95 billion last week and interbank levels were also low, which is an indication that the market is struggling with liquidity issues,” he said.
Troubled by the growing public debt levels, Treasury has lately turned to the domestic market to borrow through issuance of T-bills—monetary instruments used by the government to borrow money from the public— though analysts have argued this could choke the market.
Currently, Malawi’s debt stock has been on the rise, hitting a record K4.76 trillion by December last year, which is double the value of the last financial year’s fiscal plan pegged at K2.3 trillion.
The World Bank has expressed fear over rising domestic debt, which previously pushed Malawi into high overall risk of debt distress and is expected to continue rising sharply, which will increasingly reduce fiscal space.
The Treasury has continued to finance fiscal deficits through domestic borrowing, reaching 5.9 percent of gross domestic product in the last fiscal year.