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‘Malawi public debt stands at $2.1 billion

The Centre for Social Concern (CfSC) has said Malawi public debt currently stands at $2.1 billion (about K777 billion), but government has disputed the figure.

In a press statement released recently, CfSC expressed concern over the rise in the public debt, especially in the past six years in the wake of Malawi’s debt cancellation.

“The build-up of Malawi debt stock to $2.1 billion (K777 billion) in less than six years is also a major concern bearing in mind that Malawi reached same levels of indebtedness for close to 40 years since independence up to 2006,” says the statement.

In 2006, Malawi received debt relief under the Heavily Indebted Poor Countries (Hipc) Multi- lateral Debt Relief Initiative (MDRI) in which $2.8 billion (K1.036 trillion) debt was reduced to $486 million (K180 billion), cancelling close to $2.4 billion (K888 billion).

But Ministry of Finance spokesperson Nations Msowoya in an e-mailed response to a questionnaire on Wednesday argued the $2.1 billion debt figure is not correct.

“I am not very sure where the $2.1 billion [total public] debt stock is coming from. As of now, government is mainly worried about domestic debt to gross domestic product (GDP) ratio which has reached a critical ratio of 20 percent. To bring the ratio down to a sustainable level, the government is focusing on repaying some of the domestic debt in the 2012/13 budget,” said Msowoya.

Asked on the current status of the public debt, Msowoya said Malawi debt currently stands at $1.926 (K713 billion), a figure earlier reported for June 2012.

He argued that Malawi’s current debt situation is sustainable.

“An analysis of Malawi debt shows that all debt ratios have not been breached. If you apply a shock of say prolonged drought, declining terms of trade, the [domestic debt] ratio worsens to 27 percent.  As of December 2012, domestic debt stood at K180 billion and this is expected to reduce further as government retires some of this domestic debt in line with the Extended Credit Facility (ECF) arrangement,” said Msowoya.

According to a report released in October 2012 by the Ministry of Finance, as of end June 2012, Malawi’s total public external and domestic debt stock amounted to $1.926 billion (K713 billion), equivalent of 54 percent of GDP, compared to $1091.3 million (K403 billion) or 33.6 percent of GDP in the corresponding period in 2011.

The report further said the total public debt grew by 67 percent in the year ending June 2012 compared to 2011. It attributed to the sharp increase in the proportion of public debt to GDP, on the huge depreciation of the kwacha which significantly deflated the dollar value of the country’s GDP.

CfSC blames the accumulation of debt on the weakness of the legal and policy framework for debt contraction.

Malawi remains one of the poorest countries in world.  

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