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Debt Retirement Fund awaits law

Williams Banda

Felix Mlusu

The Treasury has said all structures necessary to establish the Debt Retirement Fund have been set except for amendments to the Public Finance Management Act.

In an interview on Wednesday, Ministry of Finance spokesperson Williams Banda said all other modalities would be ironed out when amending the law.

“All the processes have been finalised and we await the finalisation of the Public Finance Management Act amendment. The Act is currently with the Ministry of Justice and we hope it will be presented to Parliament during the next meeting.

“It will be clear on where the money will come from and how it will be used,” Banda said.

When presenting the 2021-22 National Budget to Parliament, Minister of Finance Felix Mlusu hinted at plans by the government to set up a debt retirement fund whose proceeds will be ring-fenced and entirely used to retire public debt until debt levels subside to sustainable levels.

He said the fund could be turned into a Malawi Sovereign Wealthy Fund which could be used for supporting economic activities and the citizenry in times of pandemics and other forms of natural disaster through bail-outs and fiscal stimulus packages.

Last month, the government paid K139.7 billion to the private sector to clear 88 percent of verified arrears.

Out of the K139.7 billion, K130.7 billion went to contractors while K9 billion was in form of tax refunds.

Claims worth K69.7 billion were rejected by the Auditor General.

According to the mid-year public debt report for 2020-21 published earlier this year by the Ministry of Finance, as at December 2020, total public debt stock amounted to K4.76 trillion or 54 percent of rebased gross domestic product (GDP), up from K4.13 trillion or 47 percent of rebased GDP in June 2020.

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