Soaring domestic debt bothers United Nations

Felix Mlusu

The United Nations (UN) has rated as unsustainable rising public debt, seen at K4.8 trillion as at December 2020.

Of the amount, K2.72 trillion is domestic debt while K2.1 trillion is foreign debt.

UN Resident Coordinator Maria Jose Torres was responding to the 2021/22 Budget Statement Finance Minister Felix Mlusu presented to Parliament on Friday.


The budget has yet another yawning K718.3 billion deficit, representing 7.0 percent of rebased gross domestic product (GDP).

To finance it, the Treasury also intends to borrow K134.8 billion and K583.5 billion from foreign and domestic sources, respectively.

In a response to an emailed questionnaire, Torres said the accumulation of debt plus interests remains a thorn in the fiscal space.


“It must be noted that allocations for debt servicing remain the second highest, curtailing the government’s fiscal space. This is linked to the persistent fiscal deficits stemming from the gap between Malawi’s revenue generating capacity and the level of expenditures as well as to the higher recourse to domestic debt in recent years.

“This has contributed to the increase of not only the total stock of debt, but also the cost of it, to the point that Malawi’s domestic debt has been deemed unsustainable,” Torres said.

She said sustainable debt management requires narrowing the fiscal deficits through sustained commitment towards increasing domestic revenues and ensuring efficiency in expenditures.

She has, however, said the UN welcomes the alignment of the budget to the Malawi Vision 2063 as fiscal plans direct resources to policies and programmes that are envisioned to propel the country towards realisation of the Sustainable Development Goals (SDGs).

She, therefore, said the UN has welcomed the measures that were announced in the budget statement to pursue improvements in public finance management, additional fiscal consolidation and improved domestic resource mobilisation.

“There is an opportunity to maximise service delivery within the available and constrained fiscal space, by completing the reform of the public sector in a coherent and holistic manner, aligning the review of the Public Finance Management Act to that of legislation on decentralisation and public service,” Torres said.

She also said the UN was happy with the proposed measures to boost growth of small businesses and develop infrastructure, saying they were important especially if the measures adequately target youth and women to boost their share in national jobs and wealth creation.

Economic and social commentator Executive Director, Willy Kambwandira, said overall, the budget statement would be a good fiscal blueprint if implemented accordingly.

He said the oversight institutions were supposed to be given more resources to expedite the outstanding backload of corruption cases and to effectively deliver on their mandate.

Kambwandira expressed concern that there was no allocation for special courts to fast track corruption cases which, he said, was a huge to fight corruption.

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