|
|
|
|
| Business |
| ‘Stop auctioning Treasury bills’ |
|
by
Tadala Makata-Kakwesa, 29 December 2004
-
18:26:19
|
The Malawi Economic Justice Network (Mejn) has said it is against the government’s idea of auctioning Treasury Bills (TBs) through the Reserve of Malawi (RBM).
The RBM announced in the media recently that it is looking for K1.6 billion from interested bidders who are willing to be paid back in three phases of after 91, 182 and 273 days from the date of the auction.
The government is auctioning the bills when it is in the process of implementing fiscal policies aimed at winning back donor support. The policies include reducing borrowing both externally and internally.
Mejn, a network of civil society organisations mandated to watch and monitor the implementation of the budget by the government, said instead of borrowing from the private sector, government should find a long term solution by introducing what it called debt swap.
Executive Director and national coordinator of the network Collins Magalasi described debt swap as a situation where government can negotiate with the international donors and the private sector to divert their assistance and cover the debts. The money could then be deducted from the next phase of disbursement.
“What they are doing right now can never, never solve the problem because this is just cyclic. It means after 31 days or so, the money has to be paid back to the creditors and this can never come to an end,” he said.
Magalasi said another alternative to the auctioning of the treasury bills is to ask bilateral donors to settle the debt.
“Much as we understand that the government has no choice but to borrow locally because of other immediate debts to settle, this problem can never be solved if government does not exercise debt swap,” he said.
He said the network proposed the idea two years ago.
The network also proposed to government not to involve banks and other big private institutions in the auction because as this bars individuals from benefiting fully from the exercise.
Magalasi said the treasury bills will have a strong negative effect on the country’s economy as there will be excess demand from the private sector against low supply thereby making interest rates increase.
He said another alternative is for government to restructure the domestic debt or externalise it instead as long as the money value will not affect the exercise.
But Finance Minister Goodall Gondwe in interview said the auctioning of the TBs has to be systematic and that does not mean the government has run short of money.
“It is important for markets (banks) to have treasury bills for an effective financial exercise and I am surprised that the market is sometimes closed,” he explained.
He said much as it is aware of the effects domestic borrowing like higher interest rates and crowding out of the private sector, government has a task of recovering old debts incurred five years ago and this will take time.
“Financially we are doing okay, and we have now received almost what we expected, but what you should know is that what we have is not enough to recover the debts” Gondwe said.
|
| |
|
|
|
|
|
