Finance Minister, Felix Mlusu, on Tuesday allayed fears that the various financial bills that government has brought to Parliament for approval would balloon the already bloated public debt.
Mlusu was reacting to a concern by former Finance Minister, Joseph Mwanamvekha, who said government needs to be mindful that too much borrowing would choke the already distressed economy.
Among the financial bills brought to Parliament Tuesday included the International Development Association (Malawi Watershed Services Improvement Project Loan Authorisation the African Development Fund Supplementary Financing for the Promoting Investment and Competitiveness in the Tourism Sector (Picts) Project Loan Authorisation; and the Opec Fund for International Development Transforming Agriculture through Diversification and Entrepreneurship Loan Authorisation.
The House also discussed the International Development Association Covid-19 Emergency Response and Health Systems Preparedness Project Authorisation and Ratification; International Development Association Additional Financing for Malawi Resilience and Disaster Risk Management Project Loan Authorisation and Ratification as well as the International Development Association Additional Financing for Southern Africa Tuberculosis and Health Systems Support Project Authourisation Bill.
Mwanamvekha said the Tonse Alliance partners used to blame the DPP administration for over borrowing when it was in power, adding that it would not be in order for the Tonse Alliance government to do the same.
He said the fact that Malawi has been calling for debt relief shows that the country’s debt levels have reached alarming levels.
But responding to the concern, Mlusu said the loan authorisation projects were already factored in the 2020/21 national budget which was passed on Wednesday last week.
“There is nothing to worry about as these loans will not bloat the country’s public levels as earlier feared,” Mlusu said.
Malawi’s public debt levels have significantly sprouted in recent years to K4.1 trillion since debt relief in 2006.
This has resulted in the country paying huge sums of money in interest to the lenders.
In the 2020/2021 financial year interest repayment has been projected at K376 billion which is 5.3 percent of GDP, representing an increase of 43.8 percent from the 2019/2020 preliminary outturn.
Of the amount K11.9 billion is interest on foreign loans while domestic interest payments have been projected at K364.2 billion.
Addressing the United Nations General Assembly last month, President Lazarus Chakwera asked developed economies and multilateral lending institutions to consider cancelling the debts owed by poor countries, including Malawi in the wake of Covid-19.
Chakwera said Malawi, being a member of both the Least Developed Countries (LDCs) and Landlocked Developing Countries (LLDC) Groups, is among the hardest hit, a situation compounded by a skewed development trajectory.
He said the country’s challenges are more exacerbated by geographical and related disadvantages such as lack of territorial access to the sea, isolation and remoteness from world markets, and high transit and transport costs.
Chakwera said the pandemic has left Malawi and other LDCs at high risk high risk of debt default; worsening trade competitiveness; supply chain disruptions; and a constrained informal working sector.
“With regard to the high risk of debt default, we acknowledge the World Bank Group, the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD) and many key development partners for the debt moratorium granted to the LDCs.
“Considering the potential length and breadth of this pandemic, we request and are hopeful for debt cancellation ultimately and an extension of the debt moratorium in the meantime. That will enable us as LDCs to recover from this devastating pandemic sustainably,” Chakwera said.