Economists say rolling over debt at higher interest rates could intensify fiscal pressures in 2025 due to increased debt servicing costs.
They said this on the back of the maturing of K433.1 billion Treasury bills (T-bills) in December this year and January next year.
In its Financial Market Development Report, the Reserve Bank of Malawi said government securities valued at K247.7 billion will mature in December this year followed by K185.44 billion in January 2025.
This means that government could either roll over the maturing debt by issuing new securities or risk being unable to meet its budgetary obligations.
Scotland-based Malawian economist Velli Nyirongo warned that rolling over the debts at higher interest rates could intensify fiscal pressures next year.
He said: “If the government fails to secure sufficient reinvestment, it may resort to borrowing from the central bank or commercial banks.
“Such borrowing risks crowding out the private sector and heightening inflationary pressures.
Nyirongo said alternatively, reducing public spending could disrupt essential services and impede economic growth.
Economic statistician Alick Nyasulu said the risks of persistent government borrowing are many, cautioning that it could “stunt economic growth and increase tax burdens,” especially if it crowds out private sector investment.
Adding to these fiscal challenges, the government faces the maturity of K88.2 billion in reverse repos during the same period, K44.1 billion in December this year and another K44.1 billion in January 2025.
Reverse repos are financial arrangements where the central bank injects liquidity into the banking system by purchasing securities with an agreement to sell them back later.
But Nyirongo warned that managing these rollovers and maturities through increased liquidity injections could destabilise the kwacha, particularly against major currencies such as the dollar.
Catholic University of Malawi economics lecturer Greenson Nyirenda said in an interview on Sunday that these developments “in theory” could exacerbate inflationary pressures.
However, he argued that the relationship between inflation and money supply growth in Malawi is complex and often influenced by external factors.
Malawi’s inflation rate is currently at 32.4 percent, according to National Statistical Office.
