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, the Annual Public Debt Report by Ministry of Finance has revealed.
According to the latest report, 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.
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.
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“Thus the growth in debt isn’t necessarily new borrowing but refinancing and rollover costs.
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“In addition, it should be mentioned that due to the impacts of the external shocks such as Covid, floods, etc, the government didn’t realise much revenues but, at the same time, it couldn’t suspend certain expenditures because of their nature. These expenditures were being financed through debt,” Banda said.
The Treasury spokesperson said major drivers of public debt have been maturing promissory notes from securitised arrears, high interest rates /refinancing costs and the large budget deficit.
He added that exchange rate depreciation has also had an impact on public debt, saying, once the currency depreciates, the Treasury revalues all external debt on the new exchange rate and the jump is always astronomical.
He further noted that, in recent years, the definition of debt has also changed, such that it includes all securities arrears and all sovereign guarantees that government provides to its parastatals.
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On Thursday, President Lazarus Chakwera pleaded for debt cancellation from the international community.
Chakwera said least developed countries (LCDs) need a decision and action on debt, arguing that Malawi is distressed because its debt is unsustainable.
“And, so, our call to action on behalf of all LDCs on this matter remains the same: Cancel the debts! Cancel the debts! Cancel the debts! As a family of nations, we have already lost two years of progress during the Decade of Action due to the economic shutdowns effected to contain Covid and, if you want the global economy to regain that lost ground, you must cancel the debts,” he said.
Chakwera argued that, from when he last addressed a similar gathering, Malawi has suffered from worst natural disasters and pandemics, which slowed down progress of the country’s economy.
“We have lost another two years of progress during this Decade of Action due to economic disruptions caused by the war in Eastern Europe, and if you want to see LDCs catch up on SDGs [Sustainable Development Goals], you must cancel the debts. That’s a decision you can make today and action you can take that would breathe oxygen into the suffocating economies of the Global South,” he said.
