Indigenous Businesses Association of Malawi (Ibam) has said government must reduce its appetite on borrowing because the tendency is pushing interest rates upwards and that affect the private sector and small and medium enterprise business people who fail to meet the high rates.
IBAM president Mike Mlombwa told Nyasa Times in Mangochi on the sidelines of the monetary policy conference, which was opened by Minister of Finance and Economic Planning Goodall Gondwe on Tuesday.
Mlombwa said government borrows heavily from the banks to the extent that the banks do not give any reprieve for the private sector.
“These banks know that they are already making huge profits from Government hence they feel there is no need to please the private sector, including SMEs.
“Banks have no welfare of people at heart. While the Reserve Bank is busy fixing the economy by maintaining monentary policy for three consecutive terms, interest rates continue to scare the private business community,” Mlombwa said.
Gondwe told parliament that government plans to borrow K176 billion from the domestic scene, an increase from the previous K30.7 billion in the 2017/18 due to diminished foreign borrowing.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) is on record to expressed concern that Malawi is already above the 20 percent threshold on domestic borrowing.
MCCCI chief executive officer Chancellor Kaferapanjirasaid heavy domestic borrowing is likely to have implications on the gains made on macroeconomic stability as well as crowd out the private sector.Speaking at the opening of the conference in Mangochi, Gondwe said Malawi economy has stabilized and government is currently doing everything possible in order to continue to grow it.
He said the Malawi kwacha has been stable for some time now showing that Government is well taking care of the economy.
But he also admitted that interest rates are indeed high and he challenged stakeholders to find solutions to the problem.
Concurring with Gondwe, Reserve Bank of Malawi Governor Dalitso Kabambe said that the economy has currently revitalised but he was quick to add that its fruits cannot be reaped now, saying it takes time for the people to benefit from the economy which is just stabilising.
The bank lending rates have reduced from 45% to 24% and this is not a mean achievement.
Malawi’s total public debt continues to soar to K2.7 trillion, which is 55 percent of the gross domestic product (GDP), amid rising fiscal deficits.
According to a published 2018/19 Draft Financial Statement, external debt accounts for K1.466 trillion or 29 percent of GDP while domestic debt accounts for K1.285 trillion or 26 percent of GDP as at end December 2017.Follow and Subscribe Nyasa TV :