Debt-burdened Malawi has pleaded with international lenders to consider restructuring its loans—or else the country risks defaulting.
Secretary to the Treasury Betchani Tchereni said this in Lilongwe on Wednesday at the two-day National Debt Conference which the Malawi Economic Justice Network (Mejn) organised using funds from African Forum and Network on Debt and Development (Afrodad).
The call to restructure public debt comes at a time Malawi’s debt, at around K13.9 trillion or 85 percent of gross domestic product, is classified as unsustainable.
According to Tchereni, restructuring public debt—in terms of repayment period and interest—would help free up resources for Malawi.
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He said such resources would help Malawi improve its balance of payment position.
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Tchereni observed that debt restructuring would also help Capital Hill to pay for essential services and would also free up some forex for private sector players to import raw materials.
He said a number of lenders were waiting for China to lead the way in debt restructuring and expressed confidence that following the nod from the Chinese, other institutions would follow suit.
“So, soon, we are going to be announcing about Kuwait, we are going to be announcing [something] about Opec [Organisation of Petroleum Exporting Countries] and we are going to be announcing about India. Very, very soon,” Tchereni said.
Recently, Malawi signed a supplemental loan agreement with China which saw Beijing restructuring the $206 million debt that Lilongwe owes the Asian country.
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The restructuring has resulted in an interest-subsidised concessional loan with a lower rate and an extended grace period of 78 months.
On her part, Economics Association of Malawi President Bertha Chikadza expressed confidence that the country’s other lenders would “restructure the debt that Malawi owes them” following a signal from China.
Meanwhile, civil society organisations Thursday made a fresh call for debt cancellation.
Briefing reporters in April in the United States capital of Washington on the sidelines of the International Monetary Fund (IMF) spring meetings, IMF Director of the African Department Abebe Aemro Selassie said the unaddressed debt situation in Malawi remained a concern.
Selassie said while Malawi’s official creditors recently provided financing assurances, the country’s other creditors are yet to follow suit.
“And that is, I think, one of the most pressing impediments that we see in our ability to continue to provide financing.
“Over the last couple of years, the fund [and] the World Bank have provided a lot of financing to the country, but this financing cannot be effective, of course, without debt relief for the country,” Selassie said.
