Malawi’s public debt stock went up in the second quarter of this year to K2.195 trillion from K2.058. This represents 47 percent of the Gross Domestic Product (GDP) as at June 31.
This is according to a Reserve Bank of Malawi quarterly report.
Of the amount, K1,349.8 trillion was external debt stock while K846.1 trillion was domestic debt stock.
The report says external debt stock as at the end of June 2017 increased by 7.3 percent to $1,860.9 million.
“As such, the ratio of external debt to GDP increased to 28.9 percent from 26.9 percent recorded in the previous quarter.
“New disbursements amounted to $99.3 million, against a total debt service of $20.5 million, compared to $26.7 million disbursements against debt service of $6.5 million in the quarter ending March 2017,” reads the report.
The central bank says the bulk of the new disbursements was from multilateral institutions, the International Development Association (IDA) and the International Monetary Fund (IMF).
Other notable disbursements, according to RBM, included Opec, Kuwait, Arab Bank for Economic Development in Africa (Badea), African Development Fund (ADF), the International Fund for Agriculture
Development (Ifad), Export Import Bank of China and European Investment Bank.
The bank further says outstanding domestic debt stock
rose by K16.4 billion in the second quarter of 2017 from K830.5 billion in the first quarter to K846.1 billion.
As a percent of GDP, domestic debt ratio rose to 18.1 percent from 17.8 percent registered in the previous quarter.
RBM says the growth in domestic debt was due to an increase in holdings of Treasury notes by RBM and commercial banks.
“In particular, Treasury notes holdings by RBM increased by 17.2 percent to K433.3 billion in the quarter under review from K369.7 billion recorded at the end of the first quarter of 2017.
Similarly, commercial banks holding of Treasury notes increased by K10.8 billion to K40.8 billion in the second quarter of 2017.
“Meanwhile, Treasury bills holdings by RBM and commercial banks registered declines of 13.1 percent and 1.1 percent to K25.0 billion and K110.4 billion, respectively due to the maturity of the instrument.
A recent study by the National Association of Smallholder Farmers of Malawi (Nasfam) revealed that Malawi’s debt grew from $557.2 million in 2007 to $1.7 billion last year.
Nasfam Chief Executive Officer, Bybon Chibonga, said the trend in debt accumulation is worrisome to smallholder farmers and the private sector.
“As you know, Malawi was forgiven of its debt. What the research was trying to achieve was to look at the performance of the country and what we have done with the money that we should have been paying the loan and what is the current status of the present loans.
“What we have found is that a lot of money has been spent into irrigation projects that have not achieved their purpose and it is a concern that apart from us benefiting from being forgiven the debt, we are actually going back to owe a lot of money to various institutions around the world that give money in terms of loans and not grants,” Chibonga said.
Malawi Economic Justice Network (Mejn) Executive Director, Dalitso Kubalasa, said Malawi has failed to register meaningful economic development despite the surging debt levels.
“We need to do a soul searching, we need to be patriotic enough and that has to start with those in the executive who are doing all the work, they have to uphold integrity at all times” Kubalasa said.