The World Bank has urged developing countries, including Malawi, to adopt stronger legal and institutional frameworks to manage public debt, which is at K16 trillion or 86 percent of the country’s gross domestic product.
The Bretton Woods institution has since warned that hidden and opaque borrowing practices threaten fiscal stability and trust in government systems.
The call comes at a time global leaders prepare to meet at the Fourth International Conference on Financing for Development in Seville, Spain from June 30 to July 3.
The summit is expected to explore solutions to mounting debt distress, shrinking fiscal space and financing gaps facing emerging markets and developing economies, including Malawi which is in debt distress, according to the International Monetary Fund.
In an interview on Wednesday, Economics Association of Malawi president Bertha Bangara-Chikadza warned that the consequences of lack of stronger lead and institution frameworks extend beyond data gaps.
She said failure to strengthen the quality and timeliness of debt reporting could have serious macroeconomic and fiscal consequences.
Said Bangara-Chikadza: “The most important one is that the fiscal credibility could deteriorate, making it more expensive for Malawi to borrow on international markets.
“Credit rating agencies and lenders rely on transparent debt data to assess risk. If Malawi’s reporting remains inadequate, the country could face higher interest rates and reduced access to concessional financing.”
On his part, economist Bond Mtembezeka observed that considering the resource shortages that are swelling
public debt, “what remains is for the government to allocate aid efficiently and productively”.
In a separate interview, Malawi Economic Justice Network executive director Bertha Phiri said that in recent years, the government has not deployed enough effort towards lowering the high public debt.
“Borrowing should be done to invest and make money from the loans so that we have enough money to service the debt and use some for other purposes,” she said.
In an e-mailed statement on Tuesday, the World Bank Group lamented the proliferation of “complex and opaque forms of financing”, noting that new debt instruments such as guaranteed, securitised and collateralised debt contracts linked to public private partnerships, State-owned enterprises and pension funds have appeared on the scene.
Reads the e-mail in part: “More debt now remains hidden from policymakers and the public. And often it comes to light too late, during the debt restructuring process.”
The World Bank has since called for “the right laws in both borrower and creditor countries and strong institutions to do the reporting and debt management the laws require”.
The recommendations resonate with ongoing concerns in Malawi, where rising public debt has sparked debate about fiscal accountability and the country’s long-term economic resilience.
To reduce risk and improve public oversight, economists have called for a clear and legally binding debt publication framework.
Ahead of the Seville in Spain conference, both the World Bank and local economists are aligning in their message that greater debt transparency, legal clarity and institutional safeguards will be essential if Malawi is to secure sustainable financing.
Ministry of Finance and Economic Affairs data shows that as at September 2024, total public debt stock was at K16.19 trillion or 86.4 percent of gross domestic product, with external debt recorded at K7.4 trillion while domestic debt was recorded at K8.79 trillion.
Malawi’s debt is higher than the 65 percent recommended threshold by global financial institutions.
Debt payments take up 43 percent of the country’s domestic revenues, limiting the government’s capacity to spend on other budget lines, according to the IMF.
In the K8 trillion National Budget, K2.17 trillion was earmarked for public debt interest payments
