Treasury continues to borrow through Treasury bills (T-bills) with figures showing that it borrowed K89.43 billion in January 2021, a development that continues to balloon domestic debt.
Reserve Bank of Malawi (RBM) figures quoted by Bridgepath Capital Limited Monthly Economic Review Report for January 2021 show that T-bills applications increased by 122.52 percent to K89.43 billion in January 2021 from K40.19 billion in December 2020.
The figures show that year-on year, total applications rose by 62.65 percent to K54.98 billion in January 2021 where as allotments increased by 126.31 percent to K39.52 billion.
Economists have since warned against borrowing through T-bills, whose trading is one of the ways government raises money without raising taxes, saying this could affect macroeconomic indicators.
Betchani Tchereni, who teaches economics at The Polytechnic, a constituent college of the University of Malawi, described the trend, as dangerous for the macroeconomic environment.
He said: “Government business should not be crippled, but borrowing in this manner to the extent where we do not seem to have a cut-off point is worrying and concerning.
“While efforts to curb inflation are underway from the monetary authorities, it is important that the fiscal angle of the economic cluster need to do its part too. We need to be sure about how we will pay off these loans really.”
On his part, Chancellor College economics professor Ben Kaluwa said the uptake of T-bills which reflects Treasury’s borrowing appetite is a cause for concern.
“We are not sure of the purpose of this kind of borrowing, but one can only speculate that it is to fund Covid-19 expenditure. Either way such kind of borrowing is worrisome and could adversely affect the already fragile macroeconomic indicators,” he said.
Investment and market analyst Emmanuel Chokani argued that the growing domestic borrowing is linked to the state of the economy, which has been under severe pressure due to the Covid-19 pandemic.
“Economic activity has been slow as taxes have been under pressure impacting government revenue, but government has expenses which cannot be reduced, for instance, salaries,” he said.
Government’s move to issue Treasury securities is regarded as a stepping stone towards easing huge public debt currently over K4 trillion, representing 65 percent of gross domestic product.