University of Malawi Professor of Economics Winford Masanjala has tipped the government to push for domestic debt cancellation.
This came out recently during the Economics Association of Malawi (Ecama) annual conference in Mangochi District.
Masanjala stressed the need for sound supply-side policies, fiscal discipline, debt forgiveness, demand management policies, and a balance between demand and supply-side policies.
“Malawi is experiencing a growth crisis, leading to declining standards of living, exacerbated by the impact of Covid.
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“The growing public debt and fiscal deficits, with deficits increasingly financed by high-cost domestic borrowing is a cancer. We need debt forgiveness from both foreign and local lenders,” Masanjala said.
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In an interview on Monday Bankers Association of Malawi President who is also Chief National Bank of Malawi Executive Officer MacFussy Kawawa said domestic debt cancellation is debatable.
“Suffice to mention, however, that ignoring the fact that local debt restructuring would hurt some financiers and the economy, commercial banks are already paying some price through that tax of additional 10 percent for those that make more than K10 billion profit,” Kawawa said.
Addressing journalists recently in Lilongwe on the 44 percent Kwacha devaluation, Minister of Finance Simplex Chithyola Banda said national debt is in the region of K10 trillion, 60 percent (about K6 trillion) of which is domestic and the remaining 40 percent is external.
“Most of the debts have unreasonably high interest rates and shorter repayment period, which means that even if we work hard to produce value, our earnings just go to repaying debt instead of developing our country,” Chithyola said.
