The government expects its interest rate bill on accumulated public debt to hit K80.4 billion in the 2014 / 2015 financial year.
The Ministry of Finance budget analysis document said to finance, that there is a K107 billion budget deficit.
“This deficit will be financed by foreign borrowing amounting to K92.1 billion and domestic borrowing amounting to K15 billion,” reads the document in part.
The document also shows that out of the total interest rates, K5.6 billion is on the foreign debt while K74.7 billion is expected to be on domestic debt.
“The high amount estimated on domestic interest payment is on account of high interest rates,” says the Ministry of Finance.
Domestic debt is at K340 billion that included interest accumulation that amounted to about K98 billion in the 2013/14 fiscal year as government was failing to service most of the loans amid high borrowing owing to donor aid withdrawal.
Speaking to a local economist Thomas Munthali, said government cannot avoid borrowing given revenue issues in the wake of donor withdrawal.
“There is no way government will avoid borrowing. But the issue is how government will manage borrowing because already there is a huge debt stock the government is grappling with,” said Munthali.
According to the Ministry of Finance, revenue has grown at an average of 30 percent in the past three years and to sustain such growth rate a number of measures have been lined up.
Government will continue to promote key growth sectors of manufacturing and tourism through incentives and promote international trade through tariff phase down.
The document further says tax collector, Malawi Revenue Authority (MRA) will widen the tax base by targeting non taxed informal sector.
There will also be an enhanced efficiency through revenue administration reforms such as collection of revenues through banks and introduction of Integrated Tax Administration System (ITAS) to replace the manual system and the introduction of Electronic Fiscal Devices to improve compliance in Value Added Tax.
Commentators say government will have to induce favourable policies to ensure performance of the business sector in the year if the K742.7 billion expenditure plan is to be successful.