A plea for debt relief for Malawi and other African economies has resurfaced, with President Lazarus Chakwera on Wednesday calling on international institutions and countries which Malawi owes money to consider debt cancellation.
And local economic think-tank, the Economics Association of Malawi (Ecama), has since echoed the call, saying extension of the debt moratorium or a cancellation altogether would be ideal, especially in the context of mitigating the impact brought about by the Covid pandemic to the local economy.
In a pre-recorded address to the 76th Session of the United Nations General Assembly currently underway in New York, the United States, Chakwera said the remedy for Malawi and other African countries to speedily walk out of the economic woes caused by Covid pandemic is by having their debt obligation scraped off.
He said this is the single most impactful thing that would help developing nations like Malawi build back better and not be left behind.
“… To help us recover from the economic devastation caused by this pandemic, the starting point is three words: Cancel the Debts,” Chakwera pleaded.
He said the country already has a social economic recovery programme for addressing the socio-economic impacts of the pandemic in place and that debt cancellation would help Malawi focus on recovery as the effectiveness of this approach has already been proven by the G20 Debt Service Suspension Initiative (DSSI).
The call comes when Malawi is gradually crawling back to the pre-Heavily Indebted Poor Country (Hipc) and Multilateral Debt Relief Initiative state yet, in 2006, it got relieved of its debt.
By December 2020, Malawi’s total public debt stock stood at about K4.76 trillion, an increase from K4.13 trillion recorded in June 2020.
The debt accumulated accounted for 54 percent of gross domestic product (GDP).
Figures from the Treasury show that public debt is seen growing to 78.2 percent of GDP by close of 2021, before climbing further to 81.3 percent of GDP in 2022 and 83 percent as well as 83.8 percent in 2023 and 2024, respectively.
In its latest Malawi Economic Monitor, one of Malawi’s key development partners, the World Bank, shows that Malawi stands at high risk of overall public debt distress which could further undermine fiscal sustainability and frustrate strides towards economic recovery.
But in an interview yesterday, Ecama Executive Director Frank Chikuta said, considering the economic crisis caused by the Covid pandemic, consideration for a debt cancellation is the most ideal option to contain the pressure.
“While systematic settlement of the debt is a better option, we are in a crisis. So, there is nothing wrong with asking for a cancellation, especially in the context of impact of the Covid pandemic on the economy,” Chikuta said.
In a separate interview, Economics Professor at University of Malawi Ben Kalua said, while chances are that the call for debt cancellation may be positively considered, going forward, Malawi needs a sustainable way out of the debt trap.
“We need to take the trade route as opposed to debt and aid. We keep on slipping faster any time our debt is scrapped off because our economic base is not stable,” Kalua said.