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Public debt rises to K3.3 trillion

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By Taonga Sabola:

Malawi’s central government debt stock rose by K177.4 billion in the fourth quarter of 2018, from K3.1 trillion in the third quarter to K3.3 trillion, triggered by an upsurge in both domestic and foreign debt.

At this level, the stock increased by K462.0 billion on an annual basis from the corresponding period in 2017.

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Economic analysts have since described the soaring debt levels as worrisome, saying they could affect the macroeconomic stability of the country.

According to figures from the Reserve Bank of Malawi (RBM), external debt stock at the end of the review quarter stood at $2.1 billion, or 29 percent of GDP, representing an increase of $38.6 million from the stock recorded the third preceding quarter.

Year-on-year, external debt increased by $100.6 million from $2.0 billion recorded at the end of a corresponding quarter in 2017.

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As at the end of the fourth quarter of 2018, debt from multilateral creditors accounted for 80.3 percent of the total debt stock while the remaining share constituted debt from bilateral creditors.

On portfolio classification debt from the World Bank’s International Development Association dominated the external debt portfolio at 43.2 percent, followed by the African Development Fund at percent; the International Monetary Fund at 10.4 percent and the Export and Import Bank of China at 10.3 percent.

Debt owed to the Export and Import Bank of China constituted 51.8 percent of all bilateral debt.

External debt service during the review quarter amounted to $13.6 million, representing a decline of $4.0 million from $17.6 million that was paid in the previous quarter.

Of the $13.6 million, $9.8 million went into amortisation as $3.8 million was paid in respect to interest payments and $0.8 million was payment for commitments fees. Major recipients comprised the Export and Import Bank of India, the World Bank’s International Development Association, and the Opec Fund,” reads part of RBM Financial and Economic Review for the fourth quarter, released on Tuesday.

It adds that domestic debt stock increased by 11.8 percent from K1.6 trillion in the third quarter to K1.7 trillion or 32.3 percent of GDP.

On annual basis, the stock increased by 28.1 percent from K1.4 trillion which was recorded as at the end 2017.

On quarterly basis, the increase was on account of a rise of K132.5 billion in the stock of Treasury notes and K68.9 billion in Ways and Means advances. The combined increase in Ways and Means advances and Treasury notes more than offset the impact of K13.3 billion Treasury bills maturities.

Economics Association of Malawi President, Chiku Kalilombe, Wednesday described the continued rise in public debt as worrisome for the economy.

“It’s a big worry. Debt levels are above maximum threshold of 50 percent of GDP, 20 percent being domestic and 30 percent being foreign debt. This affects macroeconomic stability and that’s why even the IMF has singled this out as a concern,” Kalilombe said.

Catholic University Dean of Social Sciences, Gilbert Kachamba, concurred with Kalilombe that the upshot in public debt was worrisome.

Kachamba said, much as borrowing may not always be bad, what is worrying is how the country is using borrowed money, saying such funds must be invested in initiatives that would bring high returns.

IMF Mission Chief for Malawi, Pritha Mitra, last week warned Capital Hill to tame its growing debt levels to avoid it getting out of control.

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