Malawi risks having its debt-to-gross domestic product (GDP) ratio rising further to 74.5 percent by end of the year.
This is according to figures on the International Monetary Fund (IMF)’s website.
The debt-to-GDP ratio compares a country’s sovereign debt to its total economic output for the year. It illuminates how strong a country’s economy is and the likelihood of paying off its debt.
According to the IMF Data Mapper, currently, the debt to GDP ratio stands at 73.3 percent.
Gross debt consists of all liabilities that require payment or payments of interest and principal by the debtor to the creditor at a date or dates in the future.
“This includes debt liabilities in the form of SDRs, currency and deposits, debt securities, loans, insurance, pensions and standardised guarantee schemes and other accounts payable. Thus, all liabilities in the GFSM 2001 system are debt, except for equity and investment fund shares and financial derivatives and employee stock options. Debt can be valued at current market, nominal, or face values,” the post on the website reads.
University of Malawi-based economist Jacob Mazalale said the projection is pointing to a true reflection of the situation.
He said Malawi’s debt is growing because its production is very low while being faced with a situation where donor aid is very little.
“Government business has to run and, because of that, public debt grows because the government has to borrow.
“Some of the money we are receiving now from development partners are loans, which means we are still borrowing. In fact, we are in a recession,” Mazalale said.
Minister of Finance Sosten Gwengwe downplayed the projection saying the Bretton Woods institution’s assumption could be premised on the status quo, with less regard to policy interventions deployed by the government.
“We have not taken out any commercial external loan this financial year. We aim to reduce, not increase, debt as a percentage of GDP.
“Our economy will grow albeit marginally. You are in recession when the economy has negative growth. We are not projecting negative growth,” Gwengwe said.