Reviewing borrowings, AIP-MCCCI makes recommendations to govt

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Wisely Phiri has advised the government to revisit the issue of borrowing, arguing that the current situation is hampering production and wealth creation.

Phiri noted in an interview over the weekend that the country’s banks prefer to lend to the government because it borrows for consumption rather than production like the private sector.

The president of the Malaysian Chinese Chamber of Commerce suggested that the government reduce borrowing as the first step to save the economy.

“First, the government should reduce borrowing, especially to subsidize small-scale agricultural inputs for consumption. If it can, the government should borrow to finance large-scale agriculture.”

“With the support, large farms will produce products to sell, thereby boosting their business and ultimately creating jobs for many people,” Phiri said.

Phiri said Malawi had invested billions of dollars in the agricultural input subsidy program, but the beneficiaries did not get enough harvest, so the government had to purchase food to distribute to these people for free, causing Malawi to suffer losses.

In the 2023/24 financial year, the Government has budgeted K117 billion for the Affordable Investment Programme.

The president of the Malaysian Chinese Chamber of Commerce also expressed dissatisfaction with the high interest rates on bank loans, saying it was a burden for local businesses but “controllable” for the government.

In February this year, Finance and Economic Affairs Minister Simpson Chichola Banda acknowledged that Malawi’s debt burden was heavy.

“Malawi’s public debt is unsustainable and the government has been working to maintain it through fiscal adjustment and debt restructuring negotiations with 10 bilateral and commercial creditors,” Simplex Chithyola Banda said.

“As of December 2023, public debt stood at K12.56 trillion, or 84.8 per cent of GDP, with total external debt standing at K6.62 trillion, while domestic debt stood at K5.94 trillion,” Banda explained.

For years, some experts, including the Mwapata Institute, have called on the government to review its agricultural input subsidy programs, arguing that they drain public coffers.