Government to reduce domestic borrowing

Post was last updated: February 20, 2017

The government has said it will reduce the rate of domestic borrowing in the second half of the financial budget.

Minister of Finance, Goodall Gondwe, said this when he presented the midterm review of the 2016/17 financial budget in parliament on Friday.

Gondwe said the government has revised the budget in such a way that the borrowing will be much less than anticipated by the International Monetary Fund (IMF).

“Although the level of domestic borrowing agreed with IMF is K60 billion, the government would like to reduce the domestic borrowing. This will help to build a cushion to enable it to sustainably response to shocks, and in order to guarantee a speedy attainment of macroeconomic stability,” Gondwe said.

He further said the estimated fiscal deficit including grants has also been adjusted downwards from K171.2 billion (4 percent of GDP) to K130.3 billion (3 percent of GDP).

Gondwe said excluding grants, the deficit has been revised from K365.9 billion to K289.0 billion.

“The deficit will be financed by K76.6 billion (1.8 percent of GDP) in foreign borrowing, and K42.3 billion (1.0 percent of GDP) in domestic borrowing. We would also be carrying forward the amount of K11.3 billion in privatisation proceeds realised from the sale of the Malawi Savings Bank and Inde Bank, which occurred in July 2015,” he said.

However, last week the IMF said it is currently reassessing Malawi’s economic growth outlook for 2017, but with a cautious optimism on the near term prospects.

Earlier, IMF estimated that the economy would grow by 4.5 percent in GDP terms.

The figure is slightly different from that of the Reserve Bank of Malawi’s (RBM) expectation that “the economy would rebound” in 2017, forecasting the domestic activity to grow by 5.6 percent.

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