Malawi’s debt at K2.1 trillion


Government’s appetite for borrowing from both local and international institutions has pushed the country’s debt profile to at least K2.1 trillion, a development which experts describe as worrisome.

For the past two years or so, opposition Members of Parliament have been accusing government of over-borrowing, thereby mortgaging the future of Malawians, ironically, the opposition too has been supporting the loan bills.

In a bid to control domestic borrowing, particularly from the Reserve Bank of Malawi (RBM), Parliament amended the RBM Act so that government should


not borrow more than 10 percent from the bank.

However, according to the Budget and Finance Committee of Parliament, government has been ‘flouting’ the law by issuing Treasury stocks at the end of a financial year instead of repaying the loans.

In an interview yesterday, Ministry of Finance Spokesperson, Nations Msowoya, confirmed that Malawi is owing foreign institutions $1.9 billion (approximately K1.31 trillion at current exchange rates) while domestic borrowing is at K0.7 trillion.


The two cumulative loans bring the total debt to K2 trillion which is nearly 200 percent of the K1.1 trillion 2016/17 national budget which Parliament passed about five months ago.

Msowoya defended the excessive borrowing, saying for development projects to take place, the country has to obtain loans “as 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,” Msowoya said.

While some observers argue that excessive borrowing further strains the economy as inflation goes up, among others, Msowoya said inflation is already going down and that the recent downward revision of the policy rate by the RBM means the economy is stabilising.

In a separate interview, a University of Malawi (Unima) professor of economics, Ben Kalua, said if the country had largely borrowed for investment, the arrangements would not be so worrying.

He said while borrowing is not intrinsically a bad thing, it overburdens the economy if it does not result in useful returns like exports.

“If you are borrowing to finance a project and the forex comes and then you export, then borrowing is not bad at all. But an important aspect of borrowing is whether, as a country, we are doing so with the aim of making sure that we will stop at some point,” Kalua said.

However, with the suspension of direct budgetary support by Malawi’s development partners, resulting in the country having a huge budget deficit, and the slow pace of investment development, observers say borrowing may not be minimised any time soon.

And according to Kalua, at some point, Malawi’s development was not very different from that of Mauritius but the western African island borrowed to develop its tourism industry which is now paying back.

“That is what we call productive borrowing and Mauritius finally shed off the loans because it was an investment which continues supporting the country’s economy,” Kalua said.

For the K1.1 trillion 2016/17 national budget, total revenue and grants were estimated at K965.2 billion of which K774.8 billion is expected to be generated locally while the balance is being cushioned by domestic and foreign loans.

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