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Treasury to borrow K400bnin Q4, Ecama concerned

Ministry of Finance and Economic Affairs is set to borrow about K400 billion in the fourth quarter (Q4) of this fiscal year, surpassing the K1.28 trillion planned borrowing for the 2024/25 Budget.

Latest Treasury notes auction calendar for the fourth quarter of this fiscal year that ends on March 31 indicates that Treasury plans to borrow K132.72 billion in January, K112.72 billion in February and K153.40 billion in March, adding up to K398.52 billion.

Bangara-Chikadza: Prioritise fiscal consolidation measures | Nation

The planned borrowing, when added to the first half accumulated domestic borrowing of K908 billion, means that borrowing this fiscal year will hit K1.306 billion, surpassing the annual target of K1.28 trillion.

Economics Association of Malawi president Bertha Bangara Chikadza has described the situation as worrisome, saying soaring domestic borrowing to finance the budget deficit highlights fiscal pressures and a deviation from fiscal discipline.

She said: “While domestic borrowing is often a necessary tool for budgetary support, excessive reliance on it can crowd out private sector borrowing and potentially lead to higher interest rates.

“This level of borrowing raises questions about the commitment towards fiscal consolidation. It is necessary, therefore, for the Treasury to prioritise fiscal consolidation measures, particularly enhancing expenditure rationalisation and resource mobilisation.”

In a separate interview yesterday, Mzuzu University economics lecturer Christopher Mbukwa described the situation as worrisome, saying expenditure pressure is causing Treasury to be desperate to borrow more.

“This leads to further accumulation of the debt, leading to further payment of debt charges, thereby shrinking our fiscal space further,” he said.

Mbukwa said there is need to check budget assumptions during budget framing and ensure that budget elements are performing as planned to avoid underperformance.

Business Partners International country manager Bond Mtembezeka said surpassing of the K1.28 trillion domestic borrowing allocation signals potential challenges in managing public debt sustainability.

“This level of borrowing could crowd out private sector investment further, elevate interest rates and strain future budgets through increased debt servicing costs,” he said.

In an earlier interview, 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.

The adjusted 2024/25 Budget stood at K6.04 trillion with the projected fiscal deficit of K1.41 trillion out of which K1.28 trillion was to be borrowed domestically and the remainder through foreign borrowing.

The World Bank earlier projected the deficit will be bloated because of expenditure pressure due to El-nino weather- related agricultural production drop, among others.

During the Mid-Year Budget Statement presentation, Minister of Finance and Economic Affairs Simplex Chithyola Banda said the overall fiscal deficit in the first half of the 2024/25 financial year was recorded at K950.9 billion, against the projected K897.2 billion, representing a variance of six percent.

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