External debt soars
Malawi’s external debt stock rose from $2.42 billion (about K1.97 trillion) in 2019 to $2.94 billion(K2.39 trillion) last year, World Bank figures have shown.
The 2022 International Debt Statistics, which is the World Bank’s compilation of statistics covering external debt of 123 low and middle income countries during 2020, shows that the country’s external debt stock to exports also rose to 282 percent from 207 percent.
Malawi’s external debt figures in the review period represent an approximately 20.8 percent increase compared to the prior year, raising fears the situation could be unsuitable if left unchecked.
In a statement accompanying the report, World Bank Group president David Malpass underscored the need for a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency.
He said: “An encompassing approach to managing debt is needed to help low and middle-income countries assess and curtail risks and achieve sustainable debt levels.
“Sustainable debt levels are vital for economic recovery and poverty reduction.”
According to the report, overall, in 2020, net inflows from multilateral creditors to low and middle-income countries, including Malawi, rose to $117 billion (about K95 trillion), the highest level in a decade.
University of Malawi economics professor Ben Kaluaa , in an interview on Tuesday, feared the growing external debt is a burden on the future generations, and could lead to increased taxes.
“Increased borrowing means an increased burden on the future generations and the economy at large. We fear that if left unchecked, we may see Malawians being heavily taxed to enable government service the loans which may in the end strain the country’s economic growth,” he said.
Kaluaa argued that if authorities manage the country’s domestic resources properly, the country could reduce borrowing from both external and internal sources.
Malawi’s public debt has increased rapidly since the country got a relief of its external debt in 2006, a development analysts say consumes about 15 percent of the national budget in interest payment alone.
Available figures show that Malawi has in the past 10 years spent over K123 billion on debt servicing and that is required to cover the repayment of interest and principal on debt for the period.
The country’s total public debt currently stands at K4.76 trillion, representing 54 percent of the gross domestic product.
In the 2021/22 National Budget Statement, Minister of Finance Felix Mlusu indicated that government was struggling to repay the huge public debt stock and reached out to the donor community for budget support and debt restructuring.
