President Lazarus Chakwera Thursday addressed the United Nations General Assembly (UNGA) and asked developed economies and multilateral lending institutions to consider cancelling debts owed by poor countries, including Malawi, in the wake of Covid-19.
Chakwera’s remarks come at a time Malawi’s debt levels have astronomically risen to K4.1 trillion in recent years; since 2006 when the country’s foreign debt was cancelled under debt relief.
This year alone, Malawi is expected to cough around K376 billion of the K2.19 trillion or 5.3 percent of GDP on interest repayment only.
Addressing the General Assembly via a video recording, Chakwera said Malawi, being a member of both the Least Developed Countries (LDCs) and Landlocked Developing Countries (LLDC) Groups, is among the hardest hit, a situation compounded by a skewed development trajectory.
The Malawi leader said the country’s challenges are further exacerbated by geographical and related disadvantages such as lack of territorial access to the sea, isolation and remoteness from world markets, and high transit and transport costs.
He said the pandemic has left Malawi and other LDCs at high risk of debt default; worsening trade competitiveness; supply chain disruptions; and a constrained informal working sector.
“With regard to the high risk of debt default, we acknowledge the World Bank Group, the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD) and many key development partners for the debt moratorium granted to the LDCs.
“Considering the potential length and breadth of this pandemic, we request and are hopeful for debt cancellation ultimately and an extension of the debt moratorium in the meantime. That will enable us as LDCs to recover from this devastating pandemic sustainably,” Chakwera said.
He also appealed for deliberate measures to ease supply chain disruptions, saying Malawi and many LDCs have large informal sectors, which play crucial roles in domestic resource mobilisation through remittances and small-scale economic production.
“We, therefore, welcome efforts to reduce transaction costs on remittances and implementation of rescue and turnaround packages for small scale enterprises,” he said.
Chakwera also expressed optimism that Malawi would achieve Sustainable Development Goals (SDGs), despite the threat from the pandemic.
He said achieving the SDGs is the best opportunity of addressing socio-economic challenges in pursuit of the vision of inclusive wealth creation and self-reliance.
“Malawi is focused on implementing those SDGs with multiplier effects on others in order to maximize scarce resources and stakeholder participation, more so, in a Covid-19 pandemic situation,” Chakwera said.
Speaking when he presented the 2020/21 national budget, Finance Minister Felix Mlusu admitted that the country is facing a serious challenge of high and rising public debt stock.
Mlusu observed that Malawi’s domestic debt is currently rated at high risk of debt distress and that in order to repay this huge debt, Ministry of Finance is looking at a possibility of establishing a Debt Retirement Fund.