The Centre for Social Concern (CfSC) says average annual domestic debt growth stands at 51.8 percent, a figure the organisation has rated as alarming.
The centre says if not controlled, the trend would greatly affect economic development and poverty eradication efforts.
CfSC says the government is expected to spend over 14 percent of funds in the national budget in servicing the loans plus interests, which it says would affect national development endeavour.
Figures contained in a report issued yesterday, show that public debt stock amounted to $5.03 billion (approximately K3, 669.3 billion) as at by June 2019.
Addressing journalists when disseminating the report, CfSC Communications Officer, Vitus Danaa Abobo, said the situation is worrisome and a serious threat to the national economic growth agenda.
Abobo said the government’s insatiable appetite for borrowing is violating the citizens’ right to a standard living, good health and well-being of self and of their family, including food, clothing, housing and medical care as espoused by the United Nations.
“If this trend is not checked, more Malawians will be wallowing in abject poverty. And just as IMF [International Monetary Fund] states, Malawi needs wider structural reforms accompanied by prudent fiscal policies to reduce deficits and public debt,” Abobo said.
In a separate interview, Managing Economic Consultant at Mlomboji and Partners Consulting, Leslie Mkandawire, said domestic debt accounts for a large proportion of the total public debt with a share of 53.7 percent against external debt share of 46.3 percent.
Mkandawire said as of June 2018, external and domestic debt accounted for 50.6 percent and 49.4 percent, respectively.
“This reversal in predominance of domestic debt should send an alarm message to the authorities. Most of this debt is not investment-related but consumption related. It will have no significant consequence on development and growth of the economy. Moreover the interests on this debt are very high,” he said.
When presenting the 2019/20 National Budget in Parliament, Finance Minister, Joseph Mwanamvekha, conceded that the government is facing challenges in the areas of fiscal deficits and public debt.
But in an interview Tuesday, Mwanamvekha said with the policies that the government has put in place, it is envisaged that debt will soon be declining in the medium to long term.
“We have already started to reduce the debt. The fact is that our debt is indeed high and needs to be managed that is why we have now emphasised on borrowing on concession terms,” Mwanamvekha said.
As at end December 2018, the government debt stood at 62 percent of GDP.
The government targets to reduce domestic debt to 20 percent of GDP by 2023.