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Government speaks on debt restructuring strategy

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SOSTEN GWENGWE

The government has said it has developed a debt restructuring strategy which will serve as a cornerstone for restoring debt sustainability.

The development comes as the country’s public debt has risen astronomically since debt relief in 2006 and now hovers around K7.3 trillion, as at September 2022.

The government has shed light on its debt strategy in the Memorandum of Economic and Financial Policies, which is accompanying the country’s Letter of Intent on measures which the government intends to implement under the Staff Monitoring Programme with Executive Board Involvement to build a track record for a Upper-Credit-Tranche (UCT) quality arrangement within the next 12 months.

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According to the memorandum, signed by Finance Minister Sosten Gwengwe and Reserve Bank of Malawi Governor Wilson Banda, the local authorities have engaged a debt adviser to support a credible process for restructuring based on adequate creditor engagement to ensure the approach taken delivers the necessary contributions in a sustainable manner.

The memorandum said all creditors were approached early in the process and “we are committed to achieve a debt treatment that puts our debt back on a sustainable path consistent with the macroeconomic parameters of the programme”.

The debt strategy, according to the memorandum, is designed to achieve debt sustainability and close financing gaps.

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It says the strategy seeks to bring external public debt back to a moderate risk of debt distress in the medium term through a combination of policy adjustment and the necessary debt treatment.

“Mobilisation of non-debt creating flows to ensure the external and fiscal financing gaps are closed over the programme period, including through the debt treatment and the mobilisation of external grant support from development partners,” the memorandum reads.

Speaking when he presented the revised 2022-23 national budget in Lilongwe on Friday, Gwengwe said, as a percentage of GDP, the total debt in nominal terms stands at 64 percent.

According to Gwengwe, there are three ways of dealing with our debt sustainability, namely debt treatment, grant mobilisation and budget optimisation.

Responding to the revised budget statement yesterday, DPP spokesperson on Financial Matters, Ralph Jooma, faulted the Tonse Alliance for presiding over the fastest growing public debt in recent years.

According to Jooma, Malawi’s debt has quickened since Tonse took over the reigns in June 2020.

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