Debt strategy seen flopping

Betchani Tchereni

The four-year Medium-term Debt Management Strategy the country adopted in 2018 has failed to bear fruit as public debt levels continued to sour, seen doubling during the period.

The strategy, launched in 2018, is aimed at guiding the country towards reduction of the public debt while containing the government’s appetite for future borrowing

By the time the strategy was being launched, Malawi’s total public debt was at K2.9 trillion but it has gone up to K5.7 trillion.


According to the strategy, Malawi was to reduce debt by lengthening of the domestic debt maturities by issuing two-year and three-year Treasury Notes while increasing the proportion of five and seven-year Treasury Notes.

“Through restructuring the public domestic debt profile, the strategy aims to lengthen the maturity of the public domestic debt. In the analysis, the strategy provides the lowest debt maturing in one year, thus demonstrating lower re-financing and re-fixing risks relative to the other strategies under consideration,” it reads.

Despite challenges with the strategy, the current administration has also come up with strategies and policies that aim at reducing debt, which economists have warned will reach unsustainable levels if not checked.


Minister of Finance Sosten Gwengwe indicated when presenting the 2022-23 National Budget Statement that government will maintain a policy of concessional borrowing; preferring grants and only under very exceptional circumstances and contract non-concessional loans for high value investments among others.

In addition to that and having fiscal discipline, the current regime has established a Debt Retirement Fund which has received mixed reactions, with some doubting if it will have an impact while others believe it is a good development.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said in an interview that Malawi no longer needs strategies or policies but investments that will make the country self-reliant, thereby reducing budget deficit and borrowing.

“We need people to start implementing and working on the strategies and policies that are just on paper and accumulate debt that is productive,” he said.

Malawi’s high debt levels have already started haunting it, as development partners are reluctant to borrow the country money.

Recently, the International Monetary Fund (IMF) ranked Malawi among regional countries facing a threat of continued rising debt to gross domestic product (GDP) ratio due to global economic woes coupled with structural domestic challenges.

The IMF warned that debt vulnerabilities remain elevated in sub-Saharan Africa, with about 20 countries either at high risk of debt distress or already in debt distress.

Last month, the United Nations Economic Commission for Africa—a UN agency mandated to support countries in the sub-region achieve inclusive industrialisation for the reduction of poverty and inequality—indicated that more than half of countries in the sub-region have relatively high government debt to GDP ratios.

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