Debt progress worries IMF
The International Monetary Fund (IMF) says it is concerned that the country’s debt situation has so far remained unaddressed.
Speaking during an African Department April 2024 press briefing on Friday, IMF director of the African Department Abebe Aemro Selassie said official creditors recently provided financing assurances, but the country’s other creditors have not yet done so.
He said: “And that is, I think, one of the most pressing impediments that we see in our ability to continue to provide financing. Over the last couple of years, the fund, the World Bank, have provided a lot of financing to the country, but this financing cannot be effective, of course, without debt relief for the country.
“And as you noted in the context of this drought, this debt relief is extremely pressing, extremely pressing, I should say. And we hope that there will be progress on that front so that any resources we provide can go to help the people of Malawi.”
Selassie admitted that debt restructuring is “always a very painful exercise”not only for the debtor country, but also creditors who risks losses and that almost always, sovereign debt restructuring take a lot of time.
Published data shows that between 2023 and 2029, Malawi will have paid 67 percent of external sovereign debt service to Multilateral Development Banks (MDBs).
As at December, of Malawi’s total external public debt of K6.62 trillion, K4.4 trillion is owed to multilateral creditors. The World Bank is the country’s largest creditor with K2.2 trillion or 33 percent of Malawi’s total external public debt.
This means that only about one third of Malawi’s external public debt stock is under negotiation, with K1.7 trillion owed to commercial creditors mostly to African Export-Import Bank (Afreximbank) and Trade and Development Bank and K742 billion owed to bilateral creditors mostly China and Saudi Arabia.
In a written response on Friday, Treasury Secretary Betchani Tchereni said Malawi is making big progress on her debt restructuring.
He said most of the country’s creditors have plegded debt relief for Malawi.
Said Tchereni: “Now the teams are working on fine-tuning the revised financial term sheets.
“We are continuing our discussions with creditors to ensure we bring the restructuring process over the finish line as soon as possible in line with Extended Credit Facility time-frame.”
He said government is working on the response package to weather shocks the country is experiencing and has so far secured support from development partners that will help with the fiscal needs to deal with the weather shocks, including a $57 million disbursement from World Bank.
The IMF had projected the economy to grow by 3.3 percent in 2024.
Meanwhile, Selassie said an IMF team is set to visit Malawi “shortly” to do a full assessment of the El Nino impact on the economy and see how the fund can support the country.
