Expert cautions Malawi government on borrowing for the 2020/2021 fiscal year

Post was last updated: June 17, 2020

An economic expert has called on the Treasury to minimise borrowing for consumption and focus on productivity.

Betchani Tchereni, a lecturer at the Polytechnic, who is also the Dean of Commerce, said this when reacting to the National Budget statement presented by Finance Minister, Joseph Mwanamvekha on Friday.

The K2 trillion 2020/2021 budget has a fiscal deficit of K651 billion.

The government intends to borrow K490 billion domestically and K161 billion externally.

“That is dangerous because the government will dig a pit in order to fill another pit. So pits will continue to be dug and will continue to be deeper and deeper,” Tcheleni said.

He warned that this would give government a burned of loan repayment plus interests in the near future.

Tcheleni said high domestic borrowing also has potential to push out potential private sector investors from and in turn would affect productivity.

Spokesperson in the Ministry of Finance, Williams Banda, said the government has an operational Debt Management strategy, which among other things intends to restructure the country’s debt from short term to long term.

“The strategy focuses on borrowing externally as they are concessional and cheaper loans.

Government has therefore, put in place turn-around strategies to tame the accumulation of domestic debt by prioritizing spending and strengthening its debt management function,” Banda said.

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