As Malawi remains among countries in the sub-Saharan Africa region at higher risk of debt distress with interest burden on public debt continuing rising, local economic think-tank, the Malawi economic Justice Network, has reiterated its call for prudence in public finance management.
Mejn Executive Director Bertha Phiri said the government has in recent years not deployed enough effort towards lowering the glaringly high public debt levels.
She was speaking yesterday in Blantyre during a consultative meeting aimed at formulating a civil society perspective on how the government can deal with the debt and the dangers of having it in huge figures.
This comes as Malawi’s total public debt stock rose by 38 percent from K6.84 trillion, or 63 percent of gross domestic product (GDP), as at the end of March 2022 to K9.4 trillion or 75 percent of GDP in March 2023.
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According to the Annual Public Debt Report by the Ministry of Finance, out of the total public debt stock, external debt was seen at $3.94 billion, or 32 percent of GDP, while K5.36 trillion ($5.22 billion), or 43 percent of GDP, was domestic debt.
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The external debt stock, according to the report, consisted of 73 percent Central Government debt and 27 percent central bank debt as at end-March 2023.
International Development Association (IDA) continues to be the largest creditor to the Malawi Government with a holding of $1.414 billion, or 36 percent of total external debt, followed by the Africa Export Import the debt.
But speaking in an interview, Phiri said the government had made enormous efforts in formulating strategies on lowering debt levels but was falling short of effectively implementing the strategies.
“The golden rule of borrowing is that borrowing should be done in order to invest and make money from the loans so that we have enough money to service the debt and use some for other purposes but that is not the case because most of our loans are for consumption,” Phiri said.
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From the meeting, Mejn will produce a paper consisting of solutions and dangers of the debt if kept unsustainable.
One of the officials from the Ministry of Finance, Tiyamika Kanthambi, said efforts were deployed towards addressing the rising debt the country has.
“We are also having some measures to retire debt and there is also an issue with debt transparency where these days we engage our parliamentarians before we contract a loan and lastly we hope that once the IMF Board approves the ECF, there will be some positive developments,” she said.
The government has lately intensified efforts toward securing a temporary relief through restricting.
Recently, the Treasury set a debt restructuring strategy which serves as a cornerstone for restoring debt sustainability.
The debt plan, according to a memorandum the government issued, is designed to achieve debt sustainability and close the financing gaps.
It says the strategy seeks to bring external public debt back to a moderate risk of debt distress in the medium term through a combination of policy adjustment and the necessary debt treatment.
Malawi has engaged creditors such as China, India and Afrexim Bank.
In its 17th Malawi Economic Monitor (Mem) released recently, the World Bank said the success of the ongoing external debt restructuring negotiations between Malawi and its creditors would help ease the country’s debt burden.
