The art of borrowing: Where the crisis lies


By Alick Ponje:


Government borrowing from commercial banks and bilateral and multilateral partners seems to have been one of the easiest means of getting money into projects that do not matter—or that have been carved not to matter.

The biggest crisis lies in citizens’ disinterest, thereby giving those that have skeletons in their closets and are starkly averse to accountability the chance to do as they please.


Now, a country saddled with a debt profile of K3.3 trillion has just been reminded that those placed to manage its resources persuaded an Indian bank to issue a $50 million (approximately K37 billion) loan which will be repaid for nothing.

The tragedy needs some serious thought because it goes beyond what we see; there are many loans obtained in the name of poor Malawians for which we have nothing to show.

An appeal by former Dedza East legislator, Juliana Lunguzi, that all loans that the government has been obtaining since 1994 should be made public for assessment, was systematically scoffed at.


At least, she managed to push through her case with the Office of the Ombudsman which, shocked at sheer abuse of the Indian bank loan, directed, among other things, that those who mishandled it should be prosecuted.

So far, no one has been.

This is upsetting those willing to see transparency and accountability becoming practical in public affairs.

“The $50 million loan case is a classic example of how, through the years, public officers have used the poor as conduits.

“Several loans are obtained in the name of the poor who do not benefit anything. It is high time we began to sincerely question some of the loan bills before they are actually approved by Parliament,” Centre for Social Accountability and Transparency Executive Director Willy Kambwandira, says.

KAMBWANDIRA— It is unfortunate

The $50 million loan tale also lays bare authorities’ lackadaisical approach towards public resources which they perhaps, feel have no owner.

Where due diligence is practical and someone is serious about what they are buying, it cannot make sense to procure equipment which is far from what is actually required.

That is why, regarding the tractor case, there are those who believe that everything was systematically arranged that at the long end of procurement, senior civil servants, business people and politicians would eventually get the machinery.

“It is unfortunate that this spirit of public officials not being accountable for how they use public resources contributes to ordinary Malawians’ suffering.

“That is why, today, we are talking about a debt profile of K3.3 trillion and there is nothing to show for it. Well, every country borrows but there should be financial prudence in borrowing,” Kambwandira says.

At present, Malawi is one of less than 10 countries in sub-Saharan Africa with debt ratios that have more than doubled the past decade.

The tragedy is that most of the loans that the country obtains are not for investment and growth but consumption such that the likelihood of more borrowing remains high.

With domestic borrowing rising— where the loans are commercial and incur huge interests—experts are worried that Malawi’s debt may soon be unsustainable.

“It is even bad that 14 percent of the budget is being used to pay loans domestically while one percent is being used on foreign loans. Domestic borrowing uses market interest rates and is very expensive while foreign debt is concessional.

“Domestic borrowing also has an impact on investments as banks are willing to lend out their money to the government. This means private investors have problems obtaining loans,” Centre for Social Concern Economic Governance Programmes Officer, Lucky Mfungwe, says.

He is worried that it will remain difficult for Malawi to break out of the trap of poverty if the country does not devise ways of positively managing its borrowing.

“You cannot just be borrowing and borrowing without thinking about whether you will be able to stop and how. Our members of Parliament must also be interested in knowing how the loans that they approve are utilised.

“It should not simply be about approving the loans without following up on whether the specifics in the bills for the loans have really been met,” Mfungwe says.

He is also of the view that civil society organisations must take keen interest in the implementation of the budget, especially now when there are indications that while Malawi’s debt indicators do not breach international benchmarks, the threat that they will soon do that is huge.

Mfungwe also wants citizens to be more involved in loan processes because they are being contracted with the intention of benefitting citizens who are taxpayers.

“The money spent on debt servicing would have been used for investment in productive and social sectors. Significant amounts of resources have, over the past few years, went to servicing debt both external and domestic.

“A significant amount of domestic debt that is short term is contracted and gives tremendous pressure on the budget. The burden of debt on individual Malawians is felt through the pressure on taxes and others,” Mfungwe says.

Kambwandira corroborates Mfungwe’s fears and states that now that information is coming out indicating that there is lack of accountability in the use of public resources, even beyond the loans, Malawians should be more interested.

“We cannot afford to mortgage the future of our country through failure to control our borrowing and expenditure. There should be more transparency in the use of resources which belong to Malawians,” he says.

So far, it is evident that since the heavily indebted poor countries relief of 2006, Malawi’s debt has rebounded and become even higher in nominal terms than it was prior to relief.

But, ever y thing else about Malawi’s debt, according to observers, may not mean much if authorities continue to treat recommendations like those by the Ombudsman in the tractor saga with careless contempt.

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