The Malawi government has up to K2.5 trillion public debt to settle, at a time the nation is sailing thorough troubled waters.
However Finance Minister in his speech in Parliament on Tuesday was upbeat the debt is manageable.
“Mr. Speaker Sir, it is worth noting that the amount of external debt contracted in each era as presented in the Report on External Loans Contracted from 1964 to 2017 (which has been circulated to all the Honourable Members of Parliament) cannot be comparable across the five political administrations we have had since independence in 1964. This is on account of two reasons; one – each era had its own rate of US Dollar inflation and two – both the operating environment and duration of the political administrations varied across the five eras. On the basis of these arguments.”
Gondwe added: “Mr. Speaker Sir, it would be inappropriate for us today to be debating as to which administration contracted more external debt than the other. Instead, we need to acknowledge the fact that each administration faced challenges that could be specific.I would like to inform the Honourable Members in this House that Malawi mostly borrows from multilateral financial institutions, key among them being the International Development Association of the World Bank Group and the African Development Fund of the African Development Bank Group. Financial support from the United Nations and the European Union is largely received in form of grants.”
Gondwe also noted that bilateral partners such as the United States of America, the United Kingdom, Japan, Germany among others have been playing a key role in Malawi’s economic endeavors.
He then said that the Peter Mutharika led government remains satisfied with the tendency of borrowing externally saying Malawi has through that achieved notable infrastructural development over the years.
He has since disclosed that government has plans to reduce domestic borrowing in a bid to bring ‘down the debt stock to a more sustainable level’.
“In line with this policy direction, the Government has consistently reduced domestic borrowing over the past three financial years from 2014/15 both in nominal amounts as well as in proportion to GDP,” said Gondwe when he briefed the August House on the status of public debt.
Malawi has over the years kept banking on donor support in its budget even though donor free budgets have been executed before.
Ministries of Education, Agriculture and Health continue to get lions share of resources in Malawi’s national budget as evident in the budgets the Mutharika regime has been deploying including the current 2017-18 national budget pegged at K1.2 trillion.
Despite the fact that Malawi’s inflation rates are decreasing, on the ground the cost of living is on the rise as evidenced by prices of basic commodities and transportation.
(More reactions to follow)