Investment management and advisory firm, Nico Asset Managers has outlined key risks still facing the Malawi economy and includes high debt levels, banking sector risks and power supply challenges.
Nico has said these challenges can affect development if they are not addressed quickly.
This is despite recent projections pointing to an economic rebound this year on the basis of improved agricultural output in the last growing season.
Estimates show that the economy may grow between four and five percent this year.
“High debt levels create future obligations for government to pay its domestic and foreign debts plus interest,” Nico said.
Figures indicate that domestic stock increased to K757.2 billion in the third quarter of 2016 from K746.7 billion in the previous quarter while foreign debt stood at $1.709 million during the third quarter of 2016 from $1.740 million in the previous quarter.
“Long term debt resulting in high levels of interest payments increase government expenditure and the budget deficit,” Nico said.
On the banking sector risk, Nico Asset Managers says high lending rates may lead to slow down in private sector growth and a decrease in capital investments.
It says that high lending rates may deter private sector growth and capital investment while leading to high default rates on loan facilities.
The firm also worries that insufficient power supply may lower productivity in the country.
As the country is still characterised by weak export base, the firm says this may affect the kwacha against major trading currencies.