Economists caution on Treasury Bills rise

The Economist Association of Malawi (Ecama) has decried the rise in Treasury Bills (T-bills) which they say could adversely affect the currently positive looking macroeconomic indicators.

Trading of TB’s is one of the ways through which government raises money without raising taxes.

Kalilombe: Trend
is worrying

Ecama president Chikumbutso Kalilombe told Business News on Wednesday that the uptake of Treasury Bills ultimately reflects government borrowing appetite.

“The [recent rise] thus shows increased government deficit. However, increased borrowing adversely affects the positive looking macroeconomic indicators,” he said.

Kalilombe wondered why government was floating high requests for people to invest in T-bills, wondering whether this could be used as a mopping tool of excess liquidity or part of government [domestic] borrowing.

Published figures from the Reserve Bank of Malawi (RBM) indicate that T-bills auctions attracted K698.2 billion in 2018 compared to K529.4 billion tendered during 2017.

This represented a 31.9 percent increase in subscriptions against an 8 percent decline in the preceding year.

Out of the total sum tendered on auctions during the review year, the primary market auctions raised K596 billion and was allotted across all tenors while T-bills worth K178.3 billion were issued through conversion of ways and means advances, consequently, total issuance amounted to K774.3 billion.

Earlier, dean of Faculty of Social Sciences at Catholic University Gilbert Kachamba said depending on what government wants to achieve, the move could have an impact on the economy in the long run.

Government’s move to issue Treasury securities is regarded as a stepping stone towards easing huge public debt, currently over K3 trillion.

Over the years, the country’s gross domestic debt has increased largely due to huge budget deficits which compel government to borrow on the domestic market to finance the gap.

Treasury had earlier revised downwards the overall fiscal deficit for the 2018/19 financial year to 3.8 percent from 4.5 percent of gross domestic product (GDP), a move analysts argued was insignificant to trigger intended results.

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