Is this normal?


The Daily Times of November 30, 2016 lead story was “Malawi’s debt at K2.1 trillion” and quotes Nations Msowoya of the Ministry of Finance saying that “this is normal…. We are not mortgaging the future of Malawians as some people are saying. Otherwise, you can see the roads that are being constructed and different other projects”. Really? What is normal, the borrowing or the purpose for borrowing on indeed the utilisation of the funds borrowed.The latest debt figure should be a warning for all levels of government to be prudent in the management of these loans, whether taken internally or externally.

Did this country not borrow from EXIM Bank under Loan (Authorisation) Bill, 23 of 2010 which was passed in Malawi Parliament on December 8, 2010 and then the loan was not used for its purpose? Is it normal that instead of the tractors bought under this being distributed to the beneficiaries and in the loan agreement, the tractors were sold at giveaway prices to those in positions of power in politics and government? Is it normal that we should repay the loans for the tractors that the Vice- President of the Malawi Congress Party who is also Speaker of Parliament Richard Msowoya, the former vice -resident of Malawi and senior People’s Party official Khumbo Kachali, Foreign Affairs Minister Francis Kasaila, a senior official of the Democratic Progressive Party, and Malawi Congress Party’s Rhino Chiphiko who holds the position of Chairperson of the Parliamentary Budget and Finance Committee bought for their personal use?

Let us face it, borrowing is sometimes necessary and important. For Malawi to achieve economic growth and development, it needs to have adequate resources. Malawi’s economic base makes it impossible to generate all the resources needed for development from domestic sources. This is because Malawi is plagued with problems of low domestic savings, low tax revenues, low productivity and meagre foreign exchange earnings and poor and sometimes suicidal economic policies. For these reasons, Malawi resorts to external financing to bridge the gap between savings and investments. The external financing has always been a combination of grants, foreign investment and loans (concessional and non-concessional). In that light, the one would argue that borrowing is normal. There is nothing bad in borrowing, if the loans are judiciously utilised. Sadly, borrowings by governments in Malawi have not yielded the desired objectives. Malawi’s huge debts have not resulted in improved welfare for the people or any remarkable infrastructural development. Although government has often argued that our loans still fall within the permissible threshold, they have not had the desired impact on the productive sectors of the economy. This is what is not normal.


According to data released by the Reserve Bank of Malawi on November 4, 2016 and available on the bank’s website, Malawi’s total external debt increased from K400 billion in 2012 to over K1 trillion in 2015. This is an increase of 160 percent. Is it surprising that this is the same time that there was massive corruption in government? Is it normal that those responsible for constructing roads ended up awarding contracts to themselves? How can we claim that this is normal when newspapers have reported several corrupt practices, especially in these same projects funded by these loans? In addition, the total debt service (principal plus interest) that Malawi is paying to external donors has increased by 208 percent from K7 billion in 2012 to K22 billion in 2015. Interest payments alone have increased by 100 percent from K7 billion in 2012 to K8 billion in 2015. Is this normal when compared to the expenditures on health (K22.8 billion) and education (K23.1 billion) in 2014-15 financial year respectively?

The present government needs to be very cautious and extremely careful in its spending; they should be highly reluctant to accumulate more debts; otherwise, the reckless and frivolous spending characteristic of the political elite, the lack of necessary savings and dwindling tobacco revenue, will lead to an economic crisis soon. Malawi’s debt problems are a result of the misdirection of economic policies pursued in the past.

Is it normal that after years of accumulating these loans, the country is not yet on a positive development trajectory. The reality in Malawi is that the situation is not as good as some of members of the political elite want us to believe. It is now common sense that the nation’s economy is in the woods, Malawi’s debts should be kept in check. Let all levels of government in the country reappraise their financial profile, avoid over-borrowing and ensure prudent management of their resources. The time has come for them to prioritise their projects and plug all leakages in their finances in keeping with the nation’s present economic realities. This is what will make this normal!

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