Malawi borrows K143bn through Treasury-bills in 3 months

Malawi Government has sincethe first quarter  (July to August 2018) borrowed K143.06 billion (locally through Treasury Bills (T-bills), according to  figures from the Reserve Bank of Malawi (RBM).

Treasury Bills  are monetary instruments used by government to borrow money from the public.

The government raises a major chunk of its finance through taxes, but it has opted to borrow locally postponing a possible rise in taxes and crowding out the private sector.

The heavy government local borrowing is against government’s fiscal policy.

Economists and money market analysts argue  that the continued borrowing on the domestic market has the potential to push up lending rates and throwing government in a debt trap with central bank figures showing that domestic debt is currently at around K1.2 trillion.

In quotes reported by Business News of The Nation daily newspaper on Tuesday, Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe cautioned government  against borrowing  through Treasury-Bills, saying they  would want to “understand the causative.”

Kalilombe wondered “why are they floating high requests for people to invest in Treasury-Bills?”

He said there is need to “carefully”  understand  if the move is being used “either as a mopping tool or part of government [domestic] borrowing.”

The private sector has always worried that heavy borrowing on domestic market may crowd out private sector and implicate the macroeconomic gains.

“The ballooning domestic borrowing is worrying for the private sector because this is likely to influence an upsurge in interest rates and crowd out private sector capital,” said Chancellor Kaferapanjira, chief executive officer of Malawi Confederation of Chambers of Commerce and Industry (MCCCI).

Malawian social commentator Stanley Onjezani Kenani  laughed at the appetite for borrowing as he posted on Facebook: “ “We’re back to the Bakili Muluzi days, when Treasury Bills were the most lucrative business for investors.”