Government’s insatiable appetite for borrowing persists, evidenced by a surge in total public debt stock by 32 percent to K5.5 trillion as at mid this year, representing 59 percent of gross domestic product (GDP).
An Annual Public Debt Report from the Ministry of Finance’s Debt and Aid Management Division show that the debt stock went up from K4.1 trillion (48 percent of GDP) in June 2020.
Ironically, the debt stock rise coincides with continued pleas by President Lazarus Chakwera for ultimate debt cancellation by international institutions and countries.
And the Treasury spokesperson Williams Banda is on record to have said that the government is devising ways of reducing borrowing.
Of the debt stock reported, $3.6 billion (about K2.9 trillion), or 31 percent of GDP, was external debt and K2.6 trillion or 28 percent of GDP was domestic debt.
External debt grew by 14 percent during the period under review, lower than the 42 percent acceleration in domestic debt.
The external debt stock consisted of 73 percent Central Government debt and 27 percent central bank debt in June 2021 as compared to 87 percent and 13 percent in June 2020, respectively.
In an attempt to meet the ever rising needs, the government has been resorting to borrowing while pushing the burden of loan repayment to the next generation.
“Multilateral creditors continued to account for the largest proportion of Malawi’s external debt and the share increased by 17 percent in June 2021. Commercial creditors followed and increased holdings by 8 percent.
“Bilateral creditors were the least and increased their holdings by 10 percent,” the reporting.
At a holding of $1, 161.78 million or 32 percent of total external debt, the International Development Association remains the largest creditor to the government, according to the report.
The second largest creditor is the Africa Export Import Bank with a holding of $644.62 million or 18 percent of total external debt followed by African Development Fund and International Monetary Fund at 12 percent each.
The Export-Import Bank of China and Export-Import Bank of India accounted for 7 percent and 4 percent, respectively. This ranking has largely remained the same compared to June 2020.
In terms of holdings, commercial banks remained the biggest holders of domestic debt and increased their holdings from K798.98 billion in June 2020 to K1, 357.74 billion in June 2021.
“They were followed by the Reserve Bank of Malawi, which marginally increased its holdings from K621.30 billion to K628.64 billion during the same period. The insurance sector also increased its holdings from K210.38 billion to K250.57,” says the Treasury.
University of Malawi Economics Professor Ben Kalua Thursday said the rising debt levels remained a governance issue.
“Malawi is maintaining levels of expenditure beyond capacity, hence, the Treasury’s resolution to continue borrowing,” Kalua said.
Malawi is gradually crawling back to the pre- Heavily Indebted Poor Country and Multilateral Debt Relief Initiative state when, in 2006, it got relieved of its external debt.