By Clever Mwale:
Budget and Finance Committee of Parliament has reignited conversation on the need for enactment of a law to put legal limits on the government’s borrowing.
This comes as the government’s appetite for debt persists, with years of untamed borrowing pushing the country into debt distress.
Malawi’s total public debt stands at approximately K23.9 trillion (around $10.3 billion), representing roughly about 91 percent of the country’s Gross Domestic Product.
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Of the amount, about K16 trillion is driven by local borrowing and fiscal deficits while about $4.3 billion is external debt, primarily owed to multilateral creditors like the World Bank, IMF, and African Development Bank.
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Due to the size of these obligations and challenging economic is actively engaged in restructuring negotiations with development partners to restore sustainability. But the road has been long and winding.
But speaking on Thursday Parliamentary Budget and Finance Committee Chairperson Sosten Gwengwe said the Debt Management Act would limit borrowing and strengthen oversight. He said the current framework has failed to contain a debt burden that has grown nearly six-fold in the past five years alone.
Gwengwe said Malawi now needs a law that sets clear borrowing and budget deficit limits instead of relying on political goodwill.
“We cannot rely on moral suasion. Legal borrowing limits would also shield the Minister of Finance from political pressure to increase spending beyond what the economy can sustain,” he said.
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Although every external loan requires parliamentary approval through a Loan Authorisation Bill, he said domestic borrowing is automatically authorised once legislators approve a deficit budget financed through borrowing.
A recent position paper by the National Debt Coalition) shows at K15.6 trillion, the domestic debt represents 65 percent of the country’s total debt stock.
Coalition focal person Dingaani Mithi said the rapid increase has pushed Malawi into a high and unsustainable debt position, squeezing fiscal space needed for roads, hospitals and other development priorities.
“The country needs stronger laws and stronger institutions to safeguard public borrowing,” Mithi said.
The endorsement comes as the government seeks to finance a budget deficit of more than K2.8 trillion this year.
Economist Velli Nyirongo said reducing domestic borrowing while financing such a large deficit would be extremely difficult.
“Unless the government simultaneously raises more domestic revenue, restrains expenditure, improves public financial management and restores the confidence of international lenders and investors, the objective is hard to attain.
