Contrary to Malawian authorities’ assertions, African Export-Import Bank (Afreximbank) says it is not engaged in debt restructuring negotiations related to any of its member countries, including Malawi.
The stance by the pan-African multilateral financial institution is in response to a Ficth Ratings Report, which downgraded Afreximbank’s credit rating, painting a negative outlook due to high credit risks and weak risk-management policies.
Fitch said the one-notch downgrade to BBB-, an indication of a slight increase in the perceived risk of default, reflects “the risk that the debt owed to Afreximbank by some of its sovereign borrowers may be restructured”.
However, in a statement on Tuesday, Afreximbank said Fitch’s negative outlook decision is hinged on the erroneous view, that the treaty establishing Afreximbank, executed by its 53 participating African States, can be violated by the bank without consequences.
Reads the statement in part: “For clarity, the bank’s establishment agreement is a treaty entered into by, and among, all participating States and between the participating States and the bank.
“Accordingly, Afreximbank would like to reaffirm that it is not participating in debt restructuring negotiations related to any of its member countries. To do so would be inconsistent with the bank establishment treaty.”
The bank said the treatment of its loans and other activities is governed by the treaty and not by classifications created outside its framework.
In August 2023, the Reserve Bank of Malawi (RBM) said debt restructuring agreements with Afreximbank and Trade and Development Bank (TDB) could help the country save $700 million (about K1.2 billion) in debt repayment during the moratorum period.
When contacted on the status of Afreximbank loan, Minister of Finance and Economic Affairs Simplex Chithyola Banda reffered Business Review to Secretary to the Treasury Betchani Tchereni and spokesperson Williams Banda, who were yet to respond to our questions by press time mid-day yesterday.
But the minister is on record as having said that government is determined to implement fiscal consolidation and that it has reached agreements with bilateral creditors on debt restructuring.
On his part, RBM spokesperson Boston Maliketi Banda said he needed time to comment on the matter.
In May t his year, United Kingdom-based global affairs think- tank ODI Global said Malawi, alongside Zambia and Ghana were finding it difficult to finalise debt restructuring negotiations with Afreximbank and TDB.
It noted that in Malawi, Afreximbank and TDB each accounted for about nine percent of external debt stock as of early 2023 although the loans also represented about 76 percent of annual external debt service in 2022.
ODI Global senior research associate development and public finance specialist Chris Humphrey is quoted in the report as having said that Malawi, Ghana and Zambia had finalised negotiations with other creditors, but not with Afreximbank and TDB as they maintain that their loans should be excluded from restructuring, just like those from the World Bank and African Development Bank.
Meanwhile, published data from UK charity Christian Aid shows that Malawi’s debts to Afreximbank and TDB had much shorter maturities with a high interest rate estimated at nine percent compared to 1.6 percent and 0.8 percent interest rates on the government and multilateral loans, respectively.
Scotland-based Malawian economist Velli Nyirongo said in an interview on Tuesday that the delay in reaching an agreement with Afreximbank is problematic for Malawi because progress on debt restructuring is a precondition for accessing new International Monetary Fund (IMF) funding.
Ministry of Finance and Economic Affairs data shows that as at September 2024, total public debt stock was K16.19 trillion or 86.4 percent projected gross domestic product, with external debt stock accruing $4.27 billion (about K7.4 trillion).
Of the external debt stock, Afreximbank debt is at $360 million (about K630 billion) while TDB debt is at $371 million (about K650 billion).
