Debt strategies worry economic experts
Economic analysts have faulted the Medium-Term Debt Management Strategy (MTDS) for banking on assumptions outside government control amid concerns over risisng debt burden.
The government, through the Ministry of Finance and Economic Affairs, developed the MTDS 2022-26 in December last year to help contain the country’s rising debt burden and ensure that the government meets its debt obligations on time.
In the strategy’s foreword, Minister of Finance and Economic Affairs Sosten Gwengwe said the MTDS 2022-26 “plans to achieve the optimal debt portfolio, grounded in a ranking of the cost and risk trade-offs of alternative debt management strategies.”
Reacting to the strategy, economics researcher and consultant Exley Silumbu said it would be risky to bank on $100 million from Malawians living in the diaspora.
“It is challenging to assess the potential of the diaspora because Malawi does not have a wide base. And most of the people in the diaspora are in low-paying jobs, so it might be a challenge to raise the amount of money the government is speaking of.”
In a separate interview, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the proposals were optimistic and would ultimately depend on the decision of the IMF Board.
He, thus, cautioned that depending on the outcomes of the IMF’s decision-making would pose a risk to the strategy because the “government, [through the Ministry of Finance and Economic Affairs], will not have full control over how the strategy pans out”.
On his part, Catholic University economics lecturer Greenson Nyirenda said the strategy would work if the government follows through with its proposal to accrue more financial debt on concessional terms.
But, he cautioned that getting more external financing would have a negative impact on the country’s trade balance because the external loans would have to be repaid in foreign currency.
Ministry of Finance and Economic Affairs data shows that as at end December 2022, total public debt reached K7.9 trillion, representing 69.93 percent of gross domestic product.
Out of this stock, K4.43 trillion is domestic debt, which is 114 percent of the total budget
