DPP breaches own manifesto on borrowing


Minister of Finance, Economic Planning and Development Goodall Gondwe has defended the country’s appetite for borrowing, insisting that what should matter is the purpose for the loan and how it is used.

Currently, Malawi has debts of K2.1 trillion, but Gondwe told Parliament on Friday that the country should not focus on the figure but on whether the borrowing is for viable projects that would contribute to the growth of the country.

The statement contradicts section 35 subsection one of chapter eight of the 2014 Democratic Progressive Party (DPP) manifesto, “Managing the public debt”, in which the party promised to restrict borrowing in line with the Public Finance Management Act.


The party also promised to institute more strict controls and monitoring of public and private borrowing to ensure that the country does not borrow beyond its capacity to repay.

The DPP also promised to borrow for production and not for consumption purposes.

“I am not saying that we should not be very careful when borrowing, we should be careful. But what matters is not the amount we are borrowing; what matters is how we use it and what we borrow for and that’s where we should concentrate. If we concentrated on that, certainly, it would be very meaningful,” Gondwe told Parliament.


Chapter eight of the DPP manifesto also promises to increase the productive and export capacity of the country’s industries so as to increase foreign exchange earnings through value addition and diversification to alleviate the debt-servicing crisis through the increase in the ability to repay the debts.

The manifesto also discourages or prevents borrowing for luxury imports but encourages borrowing for industrialisation and income-generating activities.

The DPP promised to enter into a dialogue with bilateral creditors, multilateral institutions and relevant international organisations to agree on appropriate strategy and framework for effective debt management in Malawi.

The current ruling party also promised to negotiate with the creditors so that old loans should be written off by converting them into grants to give the country a fresh start.

Gondwe said the problem lies in the country’s ability to service the debt as the revenue percentage allocated to loan servicing is too low compared to other countries.

He mentioned Kenya where members of Parliament have agreed that next year 40 percent of the revenue will be used to service debts while Malawi’s debt service percent stands at 12 percent.

“I have just come from Kenya and what is happening there is very interesting. Members of Parliament were saying, and my colleague there agreed, that next year something like 40 percent of their revenue will go to servicing the debt. I looked at our figures here, it is 12 percent. So, really quite frankly, we are not doing badly because most of what we borrow in this country is concessionary money. In fact, in most cases we have grants,” he said.

Malawi owes foreign institutions $1.9 billion (about K1.4 trillion at current exchange rates) while domestic borrowing is at K700 billion, bringing the total debt to K2.1 trillion, which is nearly 200 percent of the K1.1 trillion 2016/17 National Budget which Parliament passed in June 24, 2016.

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