Government’s appetite for borrowing still high – Capital Radio Malawi
18 June, 2024

Government’s appetite for borrowing still high

Public sector debts to the banking system increased by K34 billion as both the central government and state-owned enterprises’ borrowing appetite continues grow.

The Reserve Bank of Malawi –RBM’s Monthly economic review for August has shown.

This happens as the private sector credit access remains low attributed to various factors such as subdued business activity.

The public sector’s credit situation was supported by both commercial banks net claims on central government and claims on state-owned enterprises, which increased by K53.4 billion and K851.8 million respectively.

The increase in these claims followed net increase in commercial banks’ holding of Treasury bills, draw down of government deposits at commercial banks and net increase in stock of Treasury notes held by the commercial banks.

However, this expansionary effect was offset by net repayments of direct loans by various government ministries, departments and agencies amounting K854.7 million.

On the other hand, annual growth in private sector credit was pegged at 24.4 percent in August from 23.6 percent in July.

This, according to the report, was still lower compared to 25.3 percent registered in a corresponding month of 2021.

On a monthly basis, the stock of private sector credit slightly increased by 1.7 percent to K975.5 billion in August.

This slower increase in private sector credit was reflective of subdued business activity as the agricultural marketing season was winding down.

Manufacturing (K8.8 billion), social and personal services (K6.7 billion); Agriculture (K4.6 billion) and Transport (K2.7 billion) were the most dominant sectors.

Economists are attributing high lending rates and government’s increased domestic borrowing as some of the factors affecting Private sector credit access.

About The Author

Leave a Reply

Your email address will not be published. Required fields are marked *