The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says government’s continued borrowing from commercial banks and the energy crisis are negatively impacting businesses as they are failing to access credit.
The chamber’s sentiments follow Reserve Bank of Malawi (RBM) figures which show that while the banking system’s supply of credit to the domestic economy increased to K963.1 billion from K924.5 billion, credit to the private sector declined by K10.1 billion to K389.7 billion in February 2018 compared to K405.4 billion during the same period last year.
In an interview, newly-elected MCCCI president Prince Kapondamgaga said government’s continued borrowing is creating competition for funds for businesses at a time production levels are dwindling due to reduced power generation.
“People can only borrow for production, but if it is hampered by energy, there is no energy to borrow.
“At the same time, people that want to go and borrow cannot get the funds in time because government has gone flat out borrowing from the commercial banks where private sector borrowing is supposed to be accessed, so this is crowding out the private sector,” he said.
Kapondamgaga said while it is the wish of industry to see
infant industries growing, there is need for government to help in promoting industry growth.
He said: “Agriculture shall continue to remain the life blood of the economy but the key question should be what kind of agriculture we want to promote: the one which promotes industry growth to create jobs and create wealth can only be possible if we have a thriving private sector. ”
According to the RBM report, net credit to government from commercial banks increased by K10.7 billion to K120.4 billion in the month under review.
The upturn was on account of an increase in commercial banks’ holding of treasury notes amounting to K11.5 billion.
Meanwhile, individual household loans, foreign exchange denominated loans and mortgages registered increases amounting to K2.1 billion, K1.1 billion, K906.2 million to K128.2 billion, K140.0 billion and K38.0 billion, respectively.
In terms of economic sectors, wholesale and retail trade continued to represent the largest share of outstanding loan stock at 27.6 percent.
Agriculture, manufacturing and community services constituted 25.7 percent, 19.2 percent and 12.1 percent, respectively, of the credit stock.
Treasury has been pursuing a vigorous fiscal adjustment since June 2014 to match the diminished available resources with the needed total budgetary requirements, according to Minister of Finance, Economic Planning and Development Goodall Gondwe.
“The objective of the adjustment is to reduce domestic borrowing to eliminate excessive liquidity in the system,” he said.