Generation lost at birth
Sitting at a distance from the labour ward at Bwaila Hospital in Lilongwe, one cannot fail to notice the delight on the faces of full-blown pregnant mothers as they bask in the sun awaiting their hour of labour.
And when the job is done, the majority of them joyfully return home with the fruits of their womb in their arms.
Some walk, some jump on a ride but one thing is common; they go home hopeful that the baby would develop into a responsible citizen in future.
At this stage, little do they know that the new-born child is already highly indebted.
Little do they know that the government has borrowed trillions of Kwacha to be paid in 30 or 40 years’ time by these children.
That is the burden that the Malawian child faces from the day they are born.
Impoverished Malawi’s public debt now hovers around K7.3 trillion, or 64 percent of GDP, a development analyst have argued is unsustainable.
Over the recent years, the debt has grown so astronomically to the point that interest payment on the debts has eaten up a significant share of the national budget.
Over the years, interest payment has by far topped other budgetary allocations.
For example, in the 2022- 23 national budget, interest repayment on public debt alone was estimated at K523 billion which was more than the K462.24 billion Malawi allocated to its education sector.
The picture becomes even more complex when one considers the fact that debt repayment and other statutory obligations such as wages and salaries as well as pensions are already equal to the tax revenue that the Malawi Revenue Authority (MRA) collects in a year.
That is to say, by the time the child enters into the second day here on earth, the government has no money to finance his health, education, agriculture and any other requirements that the baby might need to grow.
Finance Minister Sosten Gwengwe admits that at the trajectory is going, Malawi could end up bearing children who are a lost generation at birth, with no opportunities, future and hope available for them.
Speaking in Lilongwe during the 2022-23 pre-budget consultations, Gwengwe falls short of saying, countrymen; I see trouble ahead if we don’t change.
Even the International Monetary Fund is worried about Malawi’s debt situation. IMF Managing Director Kristalina Georgieva believes Malawi is in a very difficult situation as it cannot take up more debt.
Answering questions from students at Georgetown University School of Foreign Service in October during a session on ‘Outlook for the Global Economy and Policy Priorities,’ Georgieva said Malawi needs to be supported with grants as debt is already unsustainable.
“I will give you an example. We are currently discussing a programme for Malawi. The country is in a very difficult situation. What we want to see is the World Bank coming up with grants; bilateral donors coming up primarily with grants because Malawi cannot take up more debt. Debt is already not sustainable,” Georgieva said.
In their November 2022 Joint IMF-World Bank Debt Sustainability Analysis the Bretton Woods institutions report that Malawi’s public debt is unsustainable, with the heaviest burden arising from liquidity ratios against exports.
The analysis notes that public debt increased to 64 percent of GDP by end of 2021, up from 54.8 percent of GDP in 2020 largely driven by accumulation of domestic debt from 21.9 percent of GDP in 2020 to 31.2 percent of GDP in 2022.
The Bretton Woods institutions note that the composition of external debt has shifted toward commercial creditors at non-concessional terms, increasing debt-servicing costs.
As part of exchange rate management, the RBM had contracted short-term exchange-rate swaps.
However, amid dwindling foreign exchange reserves and thus liquidity challenges, these were converted into medium-term facilities and contributed to the jump in external debt from 25 percent at the end of 2018 to 33 percent at the end of 2020.
In its 16th Malawi Economic Monitor, the World Bank predicts that in the absence of significant restructuring, public debt is projected to increase further due to high fiscal deficits financed through high-cost domestic borrowing.
According to the bank, although non-concessional external debt incurred to support foreign currency reserves is currently being restructured, it remains a concern.
In addition, the World Bank says restructuring with bilateral lenders is being sought.
But why has Malawi found herself in such a precarious position just 16 years after the 2006 debt relief under the enhanced initiative for the Heavily Indebted Poor Countries?
All the borrowing must be approved by Parliament and in this case, it was really approved Parliament.
Budget and Finance Committee of Parliament Chairperson Gladys Ganda admits that Parliament could have done better in scrutinising some of the loans which she argued have gone towards more of consumption than production.
Moving ahead, Ganda says the House needs to be extra cautious when approving further borrowings by government.
On the back of high public debt and economic underperformance, poverty levels are increasing further.