Ministry of Finance and Economic Affairs has issued two prospectuses of about K60 billion meant for debt refinancing arrangement, efectively rolling over debt to raise short-term liquidity.
On December 31 2024, the ministry issued a five-year development bond valued at K10 billion while this week it has issued a three-year K49.02 billion Treasury note for debt refinancing.
Money market analysts say this means the government will use the funds realised to service or settle maturing debt owed to domestic lenders through either direct borrowing from banks or past Treasury bills.
Reads the prospectus in part: “Government through the Reserve Bank of Malawi [RBM] reserves the right to accept bids in full or part thereof or reject them in total without giving any reason.
“The bond will be listed on the Malawi Stock Exchange.”
In an interview on Monday, capital market analyst Cosmas Chigwe described the K49 billion Treasury note for refinancing existing debt as a typical example of debt rollover, addressing short-term liquidity, but worsening long-term solvency.
He said: “With our debt-to- GDP [gross domestic product] ratio above 80 percent and 24.3 percent of the current budget already allocated to debt servicing, continued reliance on expensive domestic borrowing only deepens our fiscal challenges.
“It increases future interest obligations, crowding out critical investments in infrastructure and social services, which are essential for economic growth.”
On his part, economist and Business Partners International country manager Bond Mtembezeka said such borrowing shows a worsening debt situation, which makes treasury desperate to create another debt.
He said: “Such borrowing only balloons the debt because fundamentally you are repaying interest and principal with new interest and principal.
“Managing debt is all about spending less than revenue and allocating the financial resources optimally.”
Ministry of Finance and Economic Affairs spokesperson Williams Banda was not immediately available for comment.
But MSE chief executive officer John Kamanga said in an interview yesterday that the market has proven its capability of raising finance through either company bonds or government Treasury notes.
He said the market has over half of pension funds which are in trillions and hence could easily provide cheap capital to investors although currently only the government has significantly tapped the opportunity through Treasury bills.
As at mid-2024, total public debt reached K15 trillion, which about 80 percent of the country’s GDP.
