The government is at an advanced stage of restructuring the debt it owes domestic creditors, with a debt advisor already completing a profiling exercise, the Treasury has confirmed.
The Treasury has said preparations are underway for the Finance Minister to begin engaging individual commercial banks on the option.
The move comes amid growing anticipation for clear direction on the restructuring process by the banking sector.
Treasury spokesperson Williams Banda confirmed that the preparations for the restructuring were well advanced.
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“There was a debt advisor who did profiling. The Minister will start engaging individual banks for a win-win situation.
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“Preparations are at an advanced stage to ensure that the debt restructuring is conducted in a plausible way. The commercial banks were already written and appraised on what may happen without affecting their operations,” Banda said.
The debt restructuring, if implemented, would be one of the most consequential financial decisions in Malawi’s recent history, with direct implications for the stability of commercial banks, availability of credit to the private sector, and the country’s broader economic recovery trajectory.
Standard Bank Malawi Chief Executive Phillip Madinga, who is also Bankers Association of Malawi President, said on the side-lines of the bank’s investors forum in Blantyre, that consultations between the government and the banking sector were ongoing.
He revealed that one factor that appeared to have slowed down decision-making was a significant upward revision in the total public debt figure.
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Madinga said that when the Finance Minister presented his mid-year budget in November, public debt was reported at around K18 trillion to K20 trillion, but that figure has since been revised upward to between K22 trillion and K24 trillion.
“But the inconsistency, or finding of new information, has actually slowed down some of the decisions that need to be made.
“Banks were not alarmed but were eager for direction. What we seek is clarity. The sooner you provide clarity in any financial market, the sooner you enable the markets to operate in a reasonable manner,” Madinga said.
Madinga said Standard Bank had already taken deliberate steps to protect itself against any potential shocks arising from a restructuring.
He said that the bank had, since 2023, been systematically reducing its exposure to long-term government securities, ensuring that all its holdings in government instruments are less than one year in maturity.
The government has been examining promissory notes that were denominated in dollars to determine the best way forward.
