By William Kumwembe
Malawi is vying in the category of three other countries within the region experiencing rapid increase in debt, the latest Economic Outlook for Southern Africa by the African Development Bank (AfDB) shows.
The report, titled ‘Debt Dynamics: The Path to Post- Covid Recovery’ shows that, between 2010 and 2020, the country along with Namibia, South Africa and eSwatini saw their debt levels elevated beyond counterparts.
The AfDB says external debt is driving the regional increase in government debt.
“Although the debt may not be unsustainable, policy makers should be concerned by the uptick,” warns the AfDB in the report.
Recent Annual Public Debt Report from the Ministry of Finance’s Debt and Aid Management Division shows that Malawi’s debt stock went up by 32 percent from K4.1 trillion (48 percent of GDP) in June 2020 to K5.5 trillion as at mid this year. This represents 59 percent of GDP.
Ironically, the debt stock rise coincides with continued pleas by President Lazarus Chakwera for ultimate debt cancellation by international institutions and countries which Malawi owes money.
Yawning budget deficit coupled with glaring mismatches between expenditure and budget lines has continually pushed the government to resort to borrowing in order to fill in the gap.
The 2021-22 nine-month National Budget deficit, for instance, was projected at K718.3 billion, representing 7.0 percent of the rebased GDP.
Figures in the AfDB report further show that, in Malawi, government spending as a percentage of GDP jumped by 18 percent between 2019 and 2020.
On the other side, the government has been grappling in its resource mobilisation drive, with the revenue collection body, Malawi Revenue Authority, persistently seen missing its targets.
“Wider gaps between spending and revenue have not only raised fiscal deficits; they also may have affected governments gross financing needs,” AfDB says.
Treasury spokesperson Williams Banda is on record to have said that the government is devising ways of reducing borrowing.
In a recent interview, University of Malawi Economics Professor Ben Kalua said rising debt levels remains a governance issue.
“Malawi is maintaining levels of expenditure beyond capacity, hence, the Treasury’s resolution to continue borrowing,” Kalua said.
Malawi is gradually crawling back to the pre- Heavily Indebted Poor Countries and Multilateral Debt Relief Initiative state when, in 2006, it got relieved of its external debt.