MIHOWA—borrowing should support drivers of growth
Economic experts have reiterated calls for Capital Hill to revisit policies guiding the government borrowing saying that the economy is sitting on a time bomb with the continued domestic borrowing.
Figures from the Reserve Bank of Malawi indicate that during an auction conducted on April 20, 2021, government borrowed K9.71 billion through treasury notes which is expected to accumulate a K3.31 billion interest upon maturity.
Treasury notes are instruments that the government uses to borrow from the money market.
In an interview, Oxfam Malawi Country Director Lingalireni Mihowa said the government should check its appetite for domestic borrowing since it mostly expensive.
“Government could do better by borrowing to support drivers of growth rather than to finance recurring costs. Government should focus more on better transport networks, enhancing electricty generation, transforming agriculture sector, increasing access to finance and structural reforms to improve the cost of doing business,” Mihowa said.
A local Public Finance Researcher Frank Ngalande agreed with Mihowa saying government should put strategies that entails that borrowing should be meant for investment rather than consumption.
“The country should focus on fiscal policies that will improve productivity because that will grow our Gross Domestic Products (GDP) thereby building a strong backbone for the economy,” Ngalande said.
In a recent interview, the Polytechnic based economic lecturer Betchani Tchereni said continued borrowing by governments is worrisome and that Malawi should negotiate with the international community on packages that will graduate her from such loans.
“We need a 10 year exit plan to become independent and negotiate packages the will spur growth of the industry sector that will be labour absorptive. They need to borrow money to use where they want to and not given under conditions or for purposes that they desire,” Tchereni said.
Minister of Finance Felix Mlusu while presenting the 2020/21 midyear budget statement in Parliament indicated that government intends to borrow K564.4 billion locally which is 6.1 percent of GDP in the revised budget.
He added that the borrowing will finance development and expenditure deficit hovering around K810 billion.
“This deficit is expected to be covered through foreign financing of K246.3 billion, with the balance of K564.4 billion programed to be financed through domestic borrowing,” Mlusu said.
Statistics show that by end December 2020, public debt stock stood at K4.7 trillion representing 54 percent of GDP.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.