Treasury has continued to borrow through Treasury bills (T-bills), with figures showing that government borrowed K113.5 billion in three months, a situation that continues to bloat the domestic debt.
Figures from the Reserve Bank of Malawi (RBM) show that the K113.5 billion was borrowed against the projected K190 billion.
Malawi Government’s public debt is currently hovering at about K3.3 trillion out of which K1.7 trillion or 32.3 percent of gross domestic product (GDP), is domestic debt, according to RBM.
Alliance Capital Limited research manager Bond Mtembezeka, in an interview yesterday, said the most important thing is to look at the trajectory of the public debt.
“Typically, there are two things that happen in that case; either government is trying to service maturing T-bills or investor funds were not that expensive, therefore, RBM can take up all funds bidded for.
“For government and the economy at large, the most important thing to look at is the trajectory of the debt whether it is going up or is it going down,” he said.
During the review period, T-bills auction performance was mixed with most part of May having no rejection rates on the applications.
For instance, in the week ending June 7, May 31, May 24, May 17, there was no rejection rate with K627.29 million, K2.65 billion, K791.13 million and K9.81 billion allotted.
Cedar Capital Limited chief executive officer Armstrong Kamphoni yesterday said less subscription could mean that investors are only willing to accept those yields.
“This could mean that the appetite for T-bills is going down because of lower interest rate,so you might find that the applicants are not keen to invest as much as much as the government wants,” he said.
Government’s move to issue treasury securities is regarded as a stepping stone towards easing huge public debt.
Over the years, the country’s debt has increased largely due to huge budget deficits which compel government to borrow on the domestic market to cover the gap.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe yesterday cautioned against government’s borrowing through T-bills, saying there is need to understand why government has taken this route.
He said there is need to carefully understand if this is being used either as a mopping tool or part of government [domestic]
In the 2018/19 financial year ending June 30 2019, fiscal deficit is expected to widen further from the earlier projected amount of K242 billion, which is 4.5 percent of GDP.
However, the World Bank observed that the 2018/19 financial year fiscal deficit appeared likely to be wider than initially forecast.
World Bank country manager Greg Toulmin said last week that in recent years, recurrent spending has consistently exceeded plans while development expenditure has fallen short.