Law Society, RBM to meet over debt crisis

In a bid to find a solution to ease the impact of soaring public debt, Malawi Law Society (MLS), Reserve Bank of Malawi (RBM) and Malawi Institute of Legal Education are set to meet on August 25.

The meeting in Mangochi is expected to generate a conference report that will advance protection of public interest in the management of public debt besides sustaining the MLS and RBM’s joint effort at building a stronger economy under the rule of law.

In a concept note on the meeting, MLS has expressed concern that with public debt reported at K7.9 trillion as at December 2022, Malawi has allocated K915 billion to pay interest on debt against K213 billion for the locally-funded development budgeted.

It reads: “Against this reality, the Constitution guarantees all persons and peoples an effectively enforceable right to economic development with particular emphasis for special consideration given for children and other vulnerable groups in the application of this right.

“To underscore the right, within the Consolidated Fund, the Constitution sets up a fund for the development of the Republic and government borrowing and expenditure is only at the sanction of the public through Parliament. The protection and enforcement of the Constitution is the mainstay of the legal profession.”

MLS says at least 200 lawyers, government officials, policy makers and relevant key industry players will share knowledge on best practices in managing sovereign debt transactions, but also how to identify and manage distressed debt situations.

MLS president Patrick Mpaka in an interview yesterday said it was sad that Malawians continue to be poor with little development to show yet debts keep soaring and interest payments are now out-passing the development budget.

He said: “What are we handing over to the next generation? Is this Constitution another set of empty promises to the people or real? The Constitution gives this as our guideline. What can we do because studies show that external debt does not correlate with development?

“We are the ones who by the privilege of our training and calling know exactly what the law, through the Constitution and other public debt management laws, gives to the people-so how best can we invoke the law to achieve its purpose and protect the vulnerable.”

RBM director of public relations Dr Mark Lungu said there was need to engage legal experts on the matter as debt agreements are contractual and go through legal personnel for clarity.

He said: “Debt is a contractual obligation. As a country, we need to understand the legal implications of going into a debt. You enter into contracts or you sign agreements. They need to know these agreements that a country goes into.

“These could either be bilateral or any other credit out there. So it is important that we move together because even before you sign a financial agreement, you need to bounce it with legal minds.”

Lungu said the central bank also takes such opportunities to make stakeholders understand how they conduct their work.

Malawi’s public debt stands at K7.9 trillion as at December 2022, with K4.43 trillion being domestic debt, while K3.47 trillion is external debt.