- NAO to assess, evaluate operational effectiveness
Malawi’s astronomical public debt is currently undergoing an audit to find options to manage the debt and rescheduling of payments.
This follows concerns by the International Monetary Fund (IMF) whose March 2015 Public Debt Analysis for the country found that public and publicly guaranteed gross debt moved from 57 percent of gross domestic product in 2012 to 76 percent of GDP in 2014.
The rising levels forced government to suspend domestic borrowing in June 2014, but then it had already reached K340 billion ($648.9 million) and later K515 billion ($982.8 million) by December 2014.
In 2006, 90 percent of Malawi’s $3.1 billion (K1.6 trillion) external debt was cancelled, but the country’s external and domestic debt has risen to the same levels of 10 years ago.
National Audit Office (NAO) has confirmed that the audit would help government to work on fiscal measures in managing the economy.
NAO corporate communications officer Lawrence Chinkhunda said the nature of the audit of public debt was to provide assurance to government on the status of public debt and whether the conditions of the debt are being complied with.
He said the audit was normal and part of the programmed audits to be conducted by the Auditor General under the Public Audit Act.
Added Chinkhunda: “We, therefore, independently assess and evaluate the adequacy and operating effectiveness of the systems and controls in the management thereof in our country.
“If there are any challenges, we have to test further and provide recommendations and possible interventions to address the shortfalls.”
It is not yet clear whether NAO will produce a report within the recommended six months as it depends on how fast Ministry of Finance presents information.
After the audit, Auditor General Stevenson Kamphasa will issue an audit opinion highlighting findings and conclusions and recommendations for improvement based on best practices, according to Chinkhunda.
In its analysis, IMF attributed the rising debt levels to the suspension of donor support in October 2013 following revelations of plunder of government resources.
The 90 percent external debt written off was about $2.97 billion (K1.6 trillion). The deal immediately released about K15 billion ($28.6 million) annually for 20 years from 2006 from debt servicing to poverty reduction activities.
In March this year, Minister of Finance and Economic Planning Goodall Gondwe said IMF had advised government to reduce the ratio of domestic debt to GDP from 18 percent, a development that meant reducing or stopping domestic debt.
IMF was also not amused by Malawi’s ratio of the national budget to GDP at about 35 percent hence the need to reduce the ratio.
About 40 percent of the country’s national budget is consumed by the public sector.
