The government is set to borrow K26.6 billion through the Malawi Stock Exchange (MSE) following issuance of a 10-year Treasury Note on the debt platform on Tuesday.
However, results of the initial bids on the day indicate that the government was able to raise K7 billion from five successful bids out of 11.
The Treasury Note will be serviced at a 15 percent coupon rate at the end of the 10-year period. However, the weighted average of successful yields was recorded at 32.83 percent.
This is coming at a time the country is said to be in debt distress ,with World Bank figures showing Malawi’s debt-to-Gross Domestic Product (GDP) at 75.2 percent as at December 2022.
The country’s total debt currently stands at K7.9 trillion.
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In an interview, economist Exley Silumbu said the government has found itself in a debt trap where it has to borrow to service interest and principal on previous loans.
“Debt has become unsustainable and we are on the verge of a debt crisis. We are in a fiscal trap; projects are being started and some are not being finished. This is all because of a financing crisis and they are all interrelated,” Silumbu said.
In a separate interview, another economist Betchani Tchereni rated Malawi’s debt levels as concerning, noting that interest payments are neck and neck with the budget on salaries.
“This rise in public debt is an indication that Malawi needs to rethink and create better domestic resource mobilization by the public sector in order to reduce the public debt and meet its obligation of supplying public goods,’ Tchereni said.
