Foreign debt rises to US$1.8 billion

Malawi’s external debt jumped by 17.4 percent in December fuelled by the US$250 million currency swap deal with the PTA Bank, the Reserve Bank of Malawi has said.

In its Financial and Economic Review for the fourth quarter of 2014, RBM says the deal saw Malawi’s external debt rising to US$1.8 billion from US$1.5 billion.

“External debt at the end of the fourth quarter of 2014 increased by 17.4 percent to US$1,802.3 million (K850.13 billion, about 34.8 percent of GDP) from US$1,535.2 million in the preceding quarter.

“The increase was mainly on account of the treasury note which was sold to PTA bank. Debt from multilateral creditors accounted for 78.2 percent of the total external debt, while bilateral debt constituted 21.8 percent,” says RBM.

Within a space of nine years, Malawi’s external debt has now risen to about 58 percent of the US$3.1 billion forgiven on September 1, 2006 under the Hipc debt relief programme.

According to RBM, Domestic debt, on the other hand, decreased by 16.9 percent and closed the fourth quarter of 2014 at K378.0 billion (16.5 percent of GDP) from K454.6 billion in the preceding quarter.

In its maiden Malawi Economic Monitor report titled “Managing Fiscal Pressures,” released in Lilongwe last month the World Bank notes that Malawi’s public debt has risen sharply in recent years, with annual debt service costs now at a value equivalent to 5.3 per cent of GDP.

World Bank urged government to continue implementing public financial management reforms to rebuild confidence in the integrity of government accounts.

In his response, Ministry of Finance spokesperson Nations Msowoya said Malawi’s external debt stock remains sustainable.

“Our external debt stock as of end 2014 remains sustainable in the medium to long-term, according to results of the DSA undertaken in December 2014. “However, Malawi’s rating on risk of debt distress is medium. Please note that the IMF/ World Bank also got similar results in their Debt Sustainability Assessment (DSA) conducted during the same period. The ‘new’ debt to PTA being referred to in the RBM report was taken into account in both DSAs,” said Msowoya.