Don’t trade excuses, manage the economy

My attention was drawn to sentiments by Secretary to the President and Cabinet Colleen Zamba that President Lazarus Chakwera’s administration is struggling to deliver due to debts inherited from the previous administration.

During an inspection tour of the Bangula-Marka Railway Line Project in Nsanje on Friday, the top civil servant, an economist of repute, said implementation of project was frustrated by the debt burden the current administration inherited from the Democratic Progressive Party (DPP).

Said Zamba: “This administration inherited a lot of debts from the previous administration which appeared to be for consumption. Some months, there is so much pressure because there is a huge bill that has to be paid. There is just so much pressure in some months.”

Naturally, her remarks did not come as a surprise as in life it is trendy for people to push the blame to everyone but themselves, every time there is a problem.

When President Chakwera and Tonse Alliance triumphed in the court-sanctioned June 23 2020 Fresh Presidential Election, the country’s public debt stood at K4.1 trillion. But 12 months later, according to data from the Debt and Aid Division of the Ministry of Finance and Economic Affairs, the debt surged by 34 percent to K5.5 trillion.

By December 2022, total public debt hit K7.9 trillion, representing 69.93 percent of the gross domestic product (GDP) pegged at K12 trillion.

Out of this stock, K4.43 trillion is domestic debt, which represents 114 percent of the total national budget, while K3.47 trillion is external debt or an equivalent of 90 percent of the total budget.

My understanding has been that managing State affairs is a relay race, not a marathon. This means that successive administrations inherit projects and debts from where another left off.

International Monetary Fund (IMF) and the World Bank have bluntly stated that Malawi’s debt levels are not sustainable. This is not a healthy position as the situation puts the country at risk of losing external debt opportunities unless it swiftly undertakes debt management, sustainability and transparency to avoid losing credit-worthiness.

Unsustainable public debt levels costs a country the trust of external lenders who may have to “think twice” before lending.

Public debt is deemed unsustainable where, among others, a country struggles to service it and, in Malawi’s case, the situation is complicated by huge budget deficits.

Borrowing is not bad as long as it is for ventures that will add economic value such as boosting production. It is also reasonable if the loan can be settled within an agreed timeframe without driving the borrower into liquidation. But when the room to manouvre gets narrower, borrowing becomes no longer sustainable as no lender will be willing to lend a country that will struggle to pay back.

Instead of engaging in the blame-game, authorities would do this country a favour by strategising on how to get out of the mess. We can blame the situation on Covid-19, the rain, the wind, Russia-Ukraine situation and everything under the sun, but what Malawians deserve are solutions to ease the pain and get the economy back on track.

One question that comes to mind is: Why is Malawi in the situation it is today? My quick observation has been that the conduct of the Malawi Government over the years has thrown the country into this mess. To fund the luxurious lifestyles of the ruling elites and their cronies, Treasury has been forced into heavy borrowing from both the domestic market and external sources.

Public finance management as well as debt management and sustainability should be a lifestyle instead. It should not be done to “impress” the IMF, the World Bank or other development partners. It should be a way of life.

Mid last year, the Malawi Government announced austerity measures, but it is back to business as usual even before any semblance of stability or recovery has been achieved with the President and team hopping from one capital to another at will. It is more of lip-service.

To attain meaningful recovery, there is need to stimulate the business environment to improve competitiveness and attract foreign direct investment. Malawi should start manufacturing on a bigger scale and for exports to generate foreign exchange.