Budget Committee frowns at rising debt
Budget and Finance Committee of Parliament chairperson Gladys Ganda says Malawi’s rising debt poses a major impediment to development as it will leave the country spending more on debt repayments at the expense of development.
Making the committee’s response to the budget in Parliament on Tuesday, she observed that the total public debt stock has currently risen to about K13 trillion, about 84.8 percent of the gross domestic product (GDP), and would likely rise to K14.4 trillion if the K1.43 trillion deficit in the 2023/24 fiscal year is factored Budget to K1.46 trillion in the proposed 2024/25 fiscal plan, representing an increase of 53.6 percent.
She said: “This allocation now constitutes about a quarter of the total budget, marking an increase from 21.5 percent last year. This concerning trend underscores the precarious debt situation facing the country.
“If we are not careful, we will end up with a situation where Malawi will be locked in a cycle where we are spending all our resources repaying past debts instead of investing in the country’s development.”
Malawi’s debt, as a percentage of GDP, is above the 60 percent threshold recommended by global financial institutions such as the International Monetary Fund and World Bank, who have since cautioned that its debt containment strategies will not work unless the government can restructure its debt held by official partners.
To correct the problem, Ganda urged the Ministry of Finance and Economic Affairs to consider expanding its tax base by, among other measures, collecting taxes on rental incomes and boosting non-tax revenue by collecting more in dividends from parastatals.
