Malawi domestic borrowing should be tamed, govt cautioned on perpetuating poverty

Malawi government has been advised to tame the borrowing appetite by cutting wasteful spending and focusing key areas following revealations that the country’s debt is set to rise by 473.6 percent as government plans to borrow about K176.1 billion in the next fiscal year starting on July 1 compared to K30.7 billion in the revised 2017/18 National Budget.

According to Reserve Bank of Malawi figures as of December 2017, the country’s public debt is at K2.4 trillion – representing K1.4 trillion external debt and K1.2 trillion domestic debt.

In a presentation to members of Parliament and stakeholdres during a Budget Analysis Open Day in Lilongwe on Monday, Malawi National Assembly public finance analyst Mphatso Elias Ackim said the government “needs to control expenditure which tends to develop into unsustainable debts which will adversely affect the economic outlook.”

He also said there is need  to “increase revenue collection.”

Ackim pointed out that although the debt situation is within sustainable levels, the government should be mindful that “the country may register unsustainable debts and the surge in domestic borrowing may result in unsustainable debt and the crowding out of private sector investment.”

Said Ackim: “Government borrowing has soared by 32.26 percent from the revised 2017/18 estimate of K183.6 billion to K242.9 billion estimate for the 2018/19 financial year.

“Whereas foreign borrowing has declined by 56.3 percent from the revised estimate of 2017/18, domestic borrowing has skyrocketed by 473.6 percent from K30.7 billion in the revised 2017/18 to K176.1 billion in the 2018/19 financial year.”

He said the increased borrowing can have adverse implications on lending rates and access to loanable funds by the private sector.

“The government must tightly control expenditures by ministries and parastatals to avoid fiscal slippages which may force government to borrow. Interest payments alone are absorbing 11 percent of the national budget,” he said.

Budget Director in the Ministry Finance, Peterson Ponderani said public finance analysts need to balance issues of borrowing and expenditure “realistically.”

“Some of you are asking government to minimise on domestic borrowing, yet you are also asking government to increase expenditure. We must balance the two realistically,” he said.

Minister of Finance, Economic Planning and Development Goodall Gondwe has on several occasions defended Malawi’s debt levels, describing them as manageable.

Malawi’s leading daily, The Nation, in an editorial comment on Tuesday pointed out that borrowing  itself is not bad, especially when it is for investment. But the paper said it smacks of “grosss inrresponsibility” when a government will be forced to borrow  simply to pay chiefs increased honoraria or indeed swell the number of Farm Input Subdidy beneficiaries.

“We share sentiments that borrowing appetite should be tamed,” the paper said.

It pointed out that unnecessary borrowing risks mortgaging the country , a situation that will stifle growth as future generations  will be burdened with debt repayment – a situation that will perpetuate impoverishment in Malawi.

 

Follow and Subscribe Nyasa TV :