Public sector’s credit dominance persists
The public sector’s indebtedness to the banking system increased by K100 billion in December to total K2.5 trillion.
The Reserve Bank of Malawi-RBM’s economic review for December shows that the public sector credit continues rising while private sector is shrinking.
This signals how the government’s treasury notes have remained attractive to the banking system compared to private sector’s capital needs.
According to the report, commercial banks’ claims on central government and state-owned enterprises increased by K124billion and K1.4 billion to K1.3 trillion and K83.3 billion respectively.
“The increase in net claims on the central government from the commercial banks was largely driven by holding of Treasury notes and Treasury bills by the commercial banks which recorded a net increase of K59 billion and K45.6 billion to K1.1 trillion and K338.3 billion, respectively,” reads the report in part.
In contrast, monetary authorities’ claims on central government and State-Owned Enterprises declined by 13.8 billion and 11.7 billion kwacha to 904.7 billion and 190.2 billion kwacha, respectively.
On the other hand, the private sector credit declined to 24.1 % in December 2022 from 26.5% in November.
Similarly, on a month-on-month basis, the stock of private sector credit decreased by K1.8 billion to K1 trillion.
Expansions in credit were recorded in the Community, social and personal services at K10.6 billion followed by Manufacturing at K5.8 billion and Electricity, gas, water and energy at K3.7 billion.
Analysts have been condemning the government’s appetite to borrowing, which results in crowding out private sector players as more lenders prefer loaning treasury than some industry players.
The 2022-2023 financial budget had a deficit provision of over 800billion kwacha which, after passing in parliament automatically permitted finance minister to borrow domestically.
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