Malawi’s Treasury has admitted that it over-borrowed domestically in the first quarter of the 2013/14 National Budget by K58.7 billion between July 1 and September 30 this year to beef up state confers.
The revelation comes in the back-drop of the infamous cash-gate that has seen money in excess of 100 billion being looted from the same government confers.
Secretary to the Treasury Newby Kumwembe made the admission Wednesday when he appeared before the Budget and Finance Committee of Parliament in Lilongwe where he updated the committee on the impact of Capital Hill cash-gate on the implementation of the budget.
“The implementation of the 2013/14 budget during the first quarter was characterised by high domestic borrowing and the cash-gate scandal. The over-borrowing amounted to K58.7 billion,” said Kumwembe.
In the wake of the cash-gate Malawi’s donors under the Common Approach to Budget Support (Cabs), Cabs, a grouping of Malawi’s major donors, are withholding $150 million (over K60 billion) earmarked for the October to December 2013 quarter.
Economic analysts have since cautioned that this freeze of donor inflows would prompt Treasury to resort to heavy borrowing from the domestic market which often culminates into crowding-out the private sector, pushing up interest rates and stifling investment levels.
Last month, Minister of Finance Maxwell Mkwezalamba parried away fears that Treasury will resort to heavy borrowing from the domestic market to patch-up the revenue gaps.
According to Kumwembe, the main contributors for the over-borrowing were spending on domestic interest, arrears clearance, and domestically-financed development projects.
He informed the committee that the over-borrowing had accompanying liquidity effects which weakened the monetary policy stance.
Kumwembe said cashgate cost K8.9 billion and it accounted for higher than anticipated expenditure.
He also said the suspension of the budget support meant that part of the budget was not financed; hence, creating a fiscal gap.
Kumwembe said the situation necessitated adjustments to the budget framework; hence, revising the budget which was agreed with the International Monetary Fund (IMF) in June 2013.
The revised 2013/14 budget has gone up by K4.5 billion to K640.3 billion from the initially projected K635.8 billion.Follow and Subscribe Nyasa TV :