Malawi, others in debt distress
The International Monetary Fund (IMF) has said sixty percent of low income countries, a category under which Malawi falls, are in or at risk of debt distress.
IMF Research Department Chief Economist and Director Pierre Olivier Gourinchas said this during a press briefing on the 2023 global economic outlook.
Gourinchas said this stems from the Covid pandemic and the energy crisis which has eroded fiscal buffers, reduced growth rates and push inflation up.
He added that apart from the low income countries, there are also emerging economies which are running into debt distress and described the situation as not the usual systematic debt crisis environment.
“We are trying to help the countries that are finding themselves in the situation of debt distress to be able to restructure their debt, maybe obtain financial assistance, and then achieve some level of macroeconomic stability and debt sustainability going forward,” Gourinchas said.
With its combined domestic and foreign debt at K7.3 trillion or over 60 percent of the gross domestic product, Malawi is among the low income countries already in debt distress.
The country is also among countries in talks with IMF for a possible debt restructuring initiative to achieve macroeconomic stability and sustainability.
Minister of Finance and Economic Affairs Sosten Gwengwe said apart from engaging the IMF, the government is engaging creditors for debt restructuring.
During the 2022-23 midyear budget review, Gwengwe outlined three debt sustainability strategies which include debt treatment, grant mobilisation and budget optimisation.
“The help of IMF through ECF will unlock substantial budget support because Malawi has almost reached DPO (Development Policy Operations) with the World Bank which is now contingent on ECF and this will stabilise our economy,” Gwengwe said.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
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