Falling interest rates ease pressure on Treasury

post was last updated: March 11, 2019

By Taonga Sabola:

The government is expected to save K1.3 billion from interest repayment on borrowing this year, thanks to reduced interest rates.

Speaking when he presented the Mid-Year Budget statement in Lilongwe on Friday, Finance Minister Goodall Gondwe said the provision of interest payments on debt has been reduced from the approved budget of K182.9 billion to K181.6 billion.

“This is on the account of lower interest bill on domestic debt during the second half due to the reduction in the Reserve Bank of Malawi policy rate by 1.5 percentage points to 14.5 percent,” Gondwe said.

He said the government is expected to accelerate domestic borrowing this year from the planned K164.2 billion to K214.7 billion.

The increased domestic borrowing will be necessitated by a perceived weak performance in non-tax revenue and the unfulfilled K60 billion commitment by the World Bank despite improvements in tax revenue performance.

Gondwe announced a K25.1 billion slash in the total budget for 2018/19 from K1.454.8 trillion to K1.4297 trillion due to what he called an expected decrease in development expenditure under domestically financed projects.

He said development expenditure has been reduced by K27.5 billion to K307.7 billion on account of the reduction in domestically financed projects from K139.4 billion to K111.9 billion while foreign financed projects were maintained at K195.8 billion.

Gondwe said, although there is a reduction in allocation to locally financed development projects, critical projects have been prioritised.

“However, recurrent expenditure is expected to slightly increase to K1.1139 trillion. Other Recurrent Transaction has been reduced in most of the votes’ recurrent expenditure allocations to accommodate the reduction in revenue and grants,” Gondwe said.

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