Debt Retirement Fund not yet set
By Cathy Maulidi:
Secretary to the Treasury Macdonald Mafuta Mwale has disclosed that the Debt Retirement Fund is not operating despite being incorporated in the Public Finance Management Act.
Mwale disclosed this in an interview, saying the fund is not operational as the government is yet to identify sources of revenue for it.
The Debt Retirement Fund was established in 2020 to be used to service public debt, which remains high, seen at K7.90 trillion or 69.93 percent of GDP. Out of this, K4.43 trillion is domestic debt while K3.47 trillion is external debt.
But three years down the line, the government is yet to get the fund moving and Mwale said this is due to lack of revenue to go into the fund.
“In the first place, if you remember, it was coming from the budget itself. So it wouldn’t make a major difference because the Debt Retirement Fund has to look at resources and has to look at sources of revenue quite different from the current sources of revenue.
“For the Debt Retirement Fund to be impactful, it has to source revenue. For example we can put a levy on some products which people consume and won’t really change the consumption rate because of price hikes. A good example is beer, even if you put a levy of K1 per bottle, they will still drink,” Mwale said.
He added that the government planned to do that on a number of products to raise more money for the fund but the plan faced challenges, considering that the decision would have an impact on a number of things including inflation.
“It is something that is still in the pipeline but we are just looking at an appropriate time when we can do something to start collecting money for the Debt Retirement Fund,” Mwale said.
But Chairperson for the Budget and Finance Committee of Parliament Gladys Ganda has described the development as worrisome, saying this means Malawi is not serious about moving to debt-free status.
“The debt is increasing and there are no clear measures that are being put in place to make sure we reduce the debt. The Debt Retirement Fund issue has been discussed for years but there is not much movement to get the fund moving,” Ganda said.
The government is asking creditors to restructure debts and, on grant mobilisation, it said Friends of Malawi has been set up and donors are mobilising resources to bail out the country and the government will also focus on spending prudently.
However, in the proposed 2023-24 national budget, the deficit has increased to K1.32 trillion and will be financed through foreign borrowing amounting to K288.78 billion and domestic borrowing amounting to K1.19 trillion.