There are fears that government’s appetite for borrowing, especially domestically, which is expected to increase significantly in the 2018/19 national budget, will become unsustainable and squeeze most investors out of business in the course of time, thereby affecting economic growth.
But Budget Director, Peterson Ponderani, has downplayed the fears, saying the borrowing is simply aimed at making sure different sectors— including those that are supposed to generate resources for the implementation of the budget itself— operate optimally.
In his presentation during a 2018/19 budget analysis public hearing that took place in Lilongwe yesterday, Parliament’s committee section Public Finance Analyst, Mphatso Ackim, feared that the country’s borrowing would soon become unsustainable.
“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,” Ackim said.
He said such borrowing trends can have adverse implications on lending rates and access to loanable funds by the private sector.
Ackim said although the debt situation is within sustainable levels, the country is at a breach of registering unsustainable debts and the surge in domestic borrowing risks crowding out private sector investors.
“The governmen t 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.
Responding to such concerns and others from stakeholders in the social sector, Ponderani said it is ironic that while most sectors are asking for more funds, they are also condemning the government for ‘excessive’ borrowing.
He also added that while the social sector—which includes health, education and agriculture—is an important one, others equally need attention in terms of resource allocation.
“When we ask for more funds to a specific sector, we must also look at inflows. Most of the presentations here have looked into expenditure without looking at where the funds are coming from.
“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.
Presentations from United Nations Children’s Fund, Civil Society Education Coalition, Malawi Health Equity Network and ActionAid have also called for adjustments in budgets to the education, health, agriculture, gender, disability and social welfare sectors to address pressing needs.
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