Reserve Bank of Malawi (RBM) Deputy Governor responsible for Economics and Regulation Macdonald Mafuta Mwale has revealed that three creditors out of the targeted four on debt restructuring have given a green light to Malawi’s call.
Mwale made the revelation on the sidelines of the Bankers Association of Malawi 15th annual dinner in Blantyre over the weekend.
“We are moving quite well in terms of negotiating for debt restructuring. Essentially there were four creditors that we wanted to negotiate with. Three have already given us what we call letters of assurance, where they are indicating their readiness to restructure the debt with Malawi so that we can see debt sustainability at the end of the day.
“In terms of timeline, we agreed that probably by the end of September we should conclude those discussions to have our debt restructured and have a clear picture in terms of what should be done going forward because this is part of the Extended Credit Facility (ECF) programme,” Mwale said.
In an interview, upon arrival from China, Secretary to the Treasury Betchani Tchereni confirmed the development to The Business Times.
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Tchereni said the Treasury has had talks with China, India and Kuwait with whom they have agreed terms to restructure debt with each of the creditors.
“It has been on a case-by-case basis where in one agreement we have been given a period to put a break on repaying the loan and shall start repaying at an agreed time. In another case we have been allowed to pay using the Kwacha instead of the dollar and elsewhere we have agreed to be paying back a reduced amount than the actual terms.
“We have engaged even more bilateral creditors and there are different levels of agreements that we have entered on debt restructuring. This gives us a breather to channel resources to other important expenditures that have been scrambling for the same resources that could have been committed to repaying the loans,” Tchereni said.
Asked on whether this would improve Malawi’s performance under the ECF, economist Velli Nyirongo said it is quite difficult to make a conclusion whether Malawi will be on track or not because the International Monetary Fund (IMF) judges its programmes.
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However, he indicated that looking at some of the conditions such as economic stability, social safety, nets and debt sustainability, people can see whether Malawi is on track or not.
“It may be premature to say at the moment we are on track or we are not on track; there’s quite a lot of things the government can do, adding on to the things that they’ve already done. I think the most important thing at the moment is fiscal discipline or avoiding unnecessary expenditures.
“Fiscal discipline will also relate to debt sustainability because when you do that, you’re more likely to improve on the amount of debts you’re borrowing because you have reduced the expenditures; so, that’s another avenue the government needs to look into,” Nyirongo said.
Malawi’s public debt quickened by K2.54 trillion in the first six months of 2024 to hit K15.1 trillion, official figures from the Ministry of Finance show.
