Commercial banks and other investors face the potential risk of losing out should the government fail to pay its burgeoning debts, an international think-tank has said.
International Fund for Agricultural Development (Ifad) Country Representative Bernadette Mukonyora said recently during a Bankers Association of Malawi (Bam) Annual Conference in Mangochi that proactive debt restructuring, diversification of bank portfolios and fiscal discipline are essential to avert such a crisis.
Malawi’s current high exposure of banks to government securities, combined with elevated debt (90 percent of GDP), creates a potential contagion risk; If the government fails to meet domestic debt obligations, banks may suffer severe losses,” she said in her paper titled ‘Spearheading a Robust Financial Inclusion Revolution: Embracing Rural Communities in an Economic Renaissance in Malawi.’
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