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Arrears fueling pressure on debt

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Milwad Tobias

Finance Minister Sosten Gwengwe has said arrears are largely to blame for the spiking of the country’s domestic debt.

Gwengwe’s comments come at a time Malawi’s public debt is now hovering at around K5.7 billion, thereby pushing the country in the debt distress zone.

Responding to questions for reporters on Monday morning, Gwengwe said the arrears come from many sources such as court cases, commitments by Ministries, Departments and Agencies and other sources.

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“What really spirals our debt too much, especially domestic debt are the arrears. I won this case in court, you owe me K2 billion. I supplied this to the Ministry of Health, you did not pay me.

“You sent some students to Kamuzu Academy and you did not finish paying us the fees for the students that the government was sending. You know such kinds of things. When you add those things, it’s a huge amount of money,” Gwengwe said.

He observed that in as far as external debt is concerned, apart from one or two debts that are not very concensional, some of them are grants and others are very concessional loans.

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“You talk of the World Bank, you talk of the African Development Bank, you talk of the IMF itself, you talk of bilateral lenders.

“What kills us debt wise is domestic debt. How does domestic debt come about, some of them are arrears. Of Course some of them are the Treasury Bills that we do but the biggest headache are the arrears and the commitments that MDAs make,” he said.

The local Chancellor of the Exchequer said in the new Ifmis, one of the things that the government will be looking at is the Commitment Control Module.

“How do we make sure that MDAs are not committing to some services, works and jobs which sometimes are lately delivered.

“That kind of thing we need to stop by using the Ifmis to ensure that it is blocking any formulation of new ideas. So the arrears are audited and we don’t pay for the arrears before they are audited,” he said.

Recently, the government hired a French firm, Global Sovereign Advisory (GSA), to help the Treasury in the management of the country’s enormous debt.

GSA is expected to come up with a sustainable debt management plan which is one of the instruments demanded by the IMF for Malawi to have an ECF programme with Malawi.

Currently, impoverished Malawi pays about $15 million per month to service the debts.

Recently, Centre for Research and Consultancy Director Milward Tobias said the hiring of the French firm was an admission of inadequate capacity to solve our own challenges.

“I really do not know what the consulting firm will do that the government would not do itself,” Tobias said.

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