Nasfam fears debt might choke economy

 

The National Association of Smallholder Farmers in Malawi (Nasfam) has expressed fear with the country’s high debt levels, saying they are a threat to the agriculture sector, the economy’s backbone.

Currently, the country is reported to have local and external debts in the region of K2.4 trillion, a figure which grows each passing year.

Chinyamunyamu (L) and her team during the meeting with the MPs

Newly appointed Nasfam chief executive officer Betty Chinyamunyamu expressed the sentiments in an interview after leading her organisation to a meeting with Parliament’s Budget and Finance Committee to discuss the impact of the national debt on agriculture growth and development, especially in the irrigation sector which constitutes 18 percent of the debt.

She noted that the country is borrowing a lot to service projects she said have no impact at all and are poorly designed.

Said Chinyamunyamu: “Eighteen [18] percent of the total national debt stock is for irrigation projects which haven’t shown any impact yet as the loans are mostly used to pay allowances to officers than the actual implementation. This negatively impacts the cause the loans are borrowed for because they seem not to work out.”

She suggested the need for government to improve the design of irrigation projects to achieve production, review programme-based budgeting framework and reduce borrowing for consumption but investment.

Said Chinyamunyamu: “We are borrowing a lot since 2006 and the debt has been going up significantly every year. Nasfam is a key player in the agriculture sector and agriculture is the mainstay of this economy.

“As a country, we have been doing well in putting 10 percent of the national budget on agriculture, but unfortunately that hasn’t translated to the expected percentage of agriculture GDP [gross domestic product] growth. There have been concerns that our investment is not having an impact or the projects in the sector are not properly designed.”

She said the rising national debt is affecting the private sector because government borrows a lot from commercial banks where the private sector also borrows, a development that in turn leaves the private sector to service exorbitant interests.

In a separate interview, Budget and Finance Committee chairperson Rhino Chiphiko said the increasing national debt is not a good sign for the country’s economy and the findings by Nasfam were worrisome.

He said Nasfam’s presentation has given a picture that things are not what they seem to be on paper.

Said Chiphiko: “As Parliament, we are really worried because the news around now is that the economy has rebounded and interest rates are going down, but the major problem is public debts.

“We are using promissory notes to contract new debts, an example is that of Lilongwe-Kasiya Road whose contractor is Mota-Engil. They haven’t paid them [Mota-Engil] up to now. You can imagine what sort of interest this will come up. We are not going anywhere. The road is estimated to cost K39billion, you can imagine what sort of interest they are charging us.”

On the 18 percent national budget that caters for irrigation, Chiphiko said the debt is not only affecting the agriculture sector, as it has spread to everyone in the country.

“In the current budget, there is K185 billion to service debts which could have been used for other issues. Fifty [50] percent of the national budget is going to debts and so is 50 percent budget of the Ministry of Agriculture which is debts and going towards irrigation which is not making any progress,” he said.

Chiphiko lamented that most of the crops grown in Malawi use subsistence farming and said there is need to change the approach since irrigation is just used for getting loans.

During one of the pre-budget consultation meetings in May this year, Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa warned about continued poverty vicious circle if the country ignores responsible debt management. n

 

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