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Borrowing to the brink

Between the Lines


The bad news about the K6.38 trillion public debt that Minister of Finance Sosten Gwengwe announced this week is that we have largely borrowed for consumption.

And we continue on that path, wildly.

There is no prudence in our unrestrained borrowing, because if a morsel of farsightedness was there, we would be reluctant to get some of these loans.

It is as though we put our leaders in those positions of power to solely be borrowing on our behalf. Otherwise, what else are they doing well in managing this battered economy? Austerity measures?

Now, that insatiable penchant for getting the loans is driving this country to the brink of distress; that is if it is not already there.

It is not like the debt fell from the moon at the thrust of some divine hand keen to see Malawi failing. Government has been planning and executing the attainment of the loans with full knowledge of what that extreme borrowing means.

These loans are negotiated by authorities before they get to Parliament for scrutiny and approval. Well, whether enough scrutiny really happens is talk for another day.

What is clear, however, is that even opposition members of Parliament (MPs) are seldom willing to ask difficult questions on the loans for fear of being branded unpatriotic.

The government side—both the client of the loan and the Ministry of Finance—will use all the palatable terms in the book to thrust around the message that they are obtaining the loans to improve lives of Malawians.

So, opposition MPs, who feel they are a government in waiting, are not willing to frustrate anything seen to be aimed at improving the lives of Malawians. Well, the truth is that they are protecting their own political ambitions.

Even the President is aware of the excessive borrowing because loan bills go to his office for his ultimate signature.

Now, with the K6.38 trillion loan being at the ratio of 63 percent to our grimly growing gross domestic product (GDP)—that current total monetary measure of the market value of all the final goods and services produced we produce—we risk losing market access and suffer higher borrowing costs.

Government should have already become serious about debt restructuring and that would also entail cutting down on the borrowing.

Simple factors about nations saddled with debt indicate they have less to invest in their future. Debt slows economic growth and this is very clear in our scenario where we remain stuck in a vicious cycle of underdevelopment.

Economists have proffered their advice several times before, that for far too long, we have been borrowing to consume and that such a trend needs to stop, but authorities choose to turn a deaf ear to such counsel.

Now, even the International Monetary Fund is worried that our borrowing is unsustainable.

In fact, we did not really need a reminder from the Bretton Woods institution that we are mortgaging the future of this country, unless those sanctioned to manage the economic affairs of this country have no clue about their jobs.

A simple check of the loans that government has obtained the past few years will show how careless authorities have been.

Millions of dollars have been obtained for projects whose change they were purported to create is nowhere to be seen. It is tragic that authorities never learn lessons from such ridiculous borrowings.

But that is Malawi for you!

We are a country terribly uninterested in analysing our past to inform our future.

When presenting a budget statement in Parliament, every minister of finance will simply skim through what has happened with the present financial blueprint and what is expected to be in the next one.

It is often when non-governmental organisations go back to the allocations and follow up on the projects which were expected to be undertaken using the funds that information begins coming out about how not to utilise public loans.

Well, very, very few countries could be without debt, but it is the levels and sustainability that should be matters of concern. For certain economies, even for debts that are more than 100 percent of their GDPs, serving is not a distressing act.

Some of them use returns from investments undertaken using the debts to service them. In our case, since we borrow to munch, even going beyond 50 percent of our GDP was way too much.

And then, there are publicly guaranteed debts by lost-making parastatals like Admarc that are not able to service their debts whose burden ultimately falls on Capital Hill.

So, the K6.38 trillion debt that Gwengwe mentioned, my friends, does not represent complete coverage of public and publicly guaranteed debt.

In low-income countries like ours, the standard is that all public debts must be shoved into one bowl for citizens to have a complete picture of how indebted they are.

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