Government borrowing to finance corruption

 Government borrowing to finance corruption

Malawi’s public debt is scaring. Government borrowing has reached an all-time high. Total public debt has hit the K15.1 trillion mark. It is estimated that with silent devaluations hitting the kwacha, and careless government expenditures, the debt levels could be running away towards K17 trillion by December. This is alarming as it is dangerous to the economy and to households.

The K5.9 trillion budget for Malawi has allocated 24 percent of money for debt repayments. This is an amount which is more than K1.4 trillion. The implications are huge. It means Malawi will continue to forgo implementation of Malawi 2063 development agenda, and poverty reduction interventions are on hold. Huge debt repayments are denying Government the opportunity to improve education, health, security, and economic growth interventions.

The impacts are also huge on individual and corporate taxpayers which pay large sums of money annually to support Malawi budget implementation, part of which are sums appropriated for debt repayments.

Malawians endure multiple taxation. Over K3 trillion is expected to be raised this year alone by the taxpayer to fund the K5.9 trillion budget. Malawians are also burdened with other forms of ‘taxes’ called non-tax revenue.

Malawians pay fees when accessing services in markets, road traffic, passports, agricultural permits, trade licenses, registration fees and fines for different purposes and offences. Malawians also pay another form of ‘tax’ called levies, especially on fuel on the pump. Accountability over the use of fuel levies has always been a contentious issue.

Apart from the debt burden, the Malawian taxpayer is now saddled with high cost of living. Inflation is above the 33 percent mark. Prices of essential basic commodities continue to skyrocket. A bag of maize of 50 kilogrammes is selling at over K40 000. Prices of other food items have more than tripled in the last two years alone. An estimated 5.7 million Malawians are in hunger crisis. Education, school fees, transportation and other services too are unaffordable.

Meanwhile, the combined devaluation of the Malawi kwacha by 75 percent in the past four years, coupled with the rising inflation continue to wipe off meagre earnings of the already lowly paid workers. The Malawian civil servant is among the hardest hit.

While their salaries have lost purchasing power, there is slow progress in increasing remuneration because Treasury has no capacity to meet demands for pay rise. This is largely because the economy is not producing as it continues to be a predominantly importing economy.

Corruption complicates the debt problem. It is generally observed that an estimated 30 percent of public money is lost to corruption. The construction sector is a fertile ground for multiple corruption activities. Procurement is another conduit for corruption.

The concern is that the rising public debt comprises money that is borrowed to finance corruption. Government borrows to finance corruptly procured projects. Debts are contracted to pay political appointees that are placed at Capital Hill, and in parastatals.

Sadly, more debts are accumulating due to Governments lack of fiscal discipline as the funds are spent on non-priority expenditures. Domestic and foreign travel budgets are also financed through borrowing, yet external travel with large delegations continue. Fiscal austerity measures have been abandoned. Government appears unstoppable in its borrowing marathon.

Now is the time to remove the incentives for borrowing which include ending corruption. Implementation of Malawi 2063 will be problematic in the face of huge public debts. While debt cancellation is part of the answer, addressing the corruption problem is more impactful.

Disciplined borrowing can finance meaningful interventions for ending poverty and support sustainable development. Now is the time to implement real austerity measures, end unjust economic policies, round up the corrupt elite, empower citizens to rise and demand debt accountability