By Kingsley Jassi:
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has expressed worry over the rise in public debt as the government intends to borrow K2.47 trillion in the next financial year.
In an analysis that points at areas of concern in the budget, the chamber sees the private sector struggling to access credit and forex as the Treasury continues to crowd the sector out of the financial market with its growing credit appetite
With the deficit at K2.47 trillion, Finance Minister Simplex Chithyola Banda indicated that the Treasury would borrow K2.33 trillion from the domestic market while the rest will be borrowed externally.
However, MCCCI sees this as a detriment to economic recovery efforts as high budget deficits are partly faulted for failure to contain inflationary pressure.
“Concerns are raised regarding the government’s borrowing for consumption, with recurrent expenditure comprising 75 percent of total spending, leaving only 25 percent for development projects. Increased borrowing also exacerbates inflation risks, with monetary supply growing by 44.9 percent in 2024, while GDP [gross domestic product] growth was only 1.8 percent, creating potential for stagflation,” the analysis reads.
MCCCI also says the budget lacks sufficient measures to support existing businesses, as emphasis is on attracting new investors.
“Revitalising the current private sector and supporting emerging industries is equally important to address immediate economic challenges,” the statement says.
The budget analysis, therefore, recommends that the government should prioritise revamping the struggling private sector by addressing an unfavourable business environment, tax regime, limited access to finance and high operational costs.
Targeted measures cited include reducing regulatory bottlenecks, improving credit access, investing in infrastructure and supporting local industries would be crucial for revitalisation.
“A well-balanced approach that combines fiscal discipline, private sector development and sustainable economic policies is crucial to steering the country towards economic stability and growth,” the MCCCI statement reads.
The MCCCI analysis follows several reactions that have faulted the increased deficit, which is feared to compromise any economic recovery effort.
In Parliament, Budget and Finance Committee of Parliament Chairperson Gradys Ganda raised the debt issue and urged the Finance Minister to reduce expenditure in line with revenue levels.
Chithyola Banda has since defended the K8 trillion proposed budget, assuring that a long-lasting financial architecture is being put in place to support the ongoing efforts of economic recovery and industrial growth.
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