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Experts differ on debt fund

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Finance and economic experts are giving contrasting views on the government’s plan to introduce debt retirement fund as total public debt surged to K4.7 trillion by end December 2020.

The government intends to introduce the fund to erase the debt which economists have warned may reach unsustainable levels thereby dwarfing chances of economic growth.

Finance Minister Felix Mlusu announced the plan when presenting the 2020/21 national budget to Parliament in September 2020.

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He then told the august House when presenting the Mid- Year Budget Review Statement recently that the implementation of the fund is expected to be approved by Cabinet to roll out on July 1.

But speaking during a panel discussion aired on Times media outlets on Tuesday, a researcher in public finance Frank Ngalande said the country still lacks capacity to retire its debt now.

He said, instead, the country should focus on fiscal policies that would spur productivity and growth.

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“Having a fund is a symptom that something is wrong and the most important element is improving our productive capacity because that is when our GDP will grow. This means we will be building a strong backbone which our economy can rest upon,” he said.

The introduction of the fund will mean the government will place some levies on citizens, whose revenue will be channelled towards it.

But IM Swedish Development Southern Region Director Dalitso Kubalasa welcomed the option, saying it would help relieve the country from its current state of debt stress.

He, however, recommended creation of awareness among the populace prior to its rolling out.

“These will be revenues coming from the citizens and when we are hearing of such plans, it is important to be transparent to the people. We need to bring in that reality so that people are prepared,” Kubalasa said.

Ministry of Finance spokesperson Williams Banda was not immediately available for a comment.

Malawi is deep in debt, hovering at K4.7 trillion, which is double the 2020/21 national budget.

The debt amount represents 54 percent of gross domestic product (GDP).

Of the amount, foreign debt was seen at K2.04 trillion or 23 percent of GDP, while domestic debt was K2.72 trillion or 31 percent of GDP.

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