United Kingdom-based global affairs think- tank ODI Global says Malawi, alongside Zambia and Ghana are finding it difficult to finalise debt restructuring negotiations with Afreximbank and Trade and Development Bank (TDB).
In a report published on Tuesday, ODI Global noted that in Malawi, Afreximbank and TDB each accounted for about nine percent of external debt stock as of early 2023 although the loans also represented about 76 percent of annual external debt service in 2022.
ODI Global senior research associate development and public finance specialist Chris Humphrey is quoted in the report as having said that Malawi, Ghana and Zambia had finalised negotiations with other creditors, but not with Afreximbank and TDB as they maintain that their loans should be excluded from restructuring, just like those from the World Bank and African Development Bank.
He said: “Other official creditor governments, including the Paris Club governments and newer lenders like China, disagree, a view supported by the International Monetary Fund (IMF). The dispute is delaying debt restructuring in all three countries.
“TDB also contends that its exposure in Malawi and Zambia should qualify as trade finance and hence be excluded.”
According to the think-tank, Malawi has reportedly stopped normal payments to both Afreximbank and TDB, but loans continue to be serviced from a collateral cash account created by the government when the loan was agreed.
“This is an obstacle in itself as delaying debt restructuring is same as delaying financial reform, which hangs the IMF programme success,” he said.
ODI Global SAID Malawi had reportedly set up a $190 million (about K333 billion) account with Afreximbank as collateral for loans and Afreximbank withdrew from that account until resources were exhausted in May 2024.
Neither Afreximbank nor TDB disclosed the financial terms of their loans, said the think-tank.
However, published data from UK charity Christian Aid shows that Malawi’s debts to Afreximbank and TDB had much shorter maturities with a high interest rate estimated at nine percent compared to 1.6 percent and 0.8 percent interest rates on the government and multilateral loans, respectively.
Ministry of Finance and Economic Affairs data shows that as at September 2024, total public debt stock was K16.19 trillion or 86.4 percent projected gross domestic product, with external debt stock accruing $4.27 billion (about K7.4 trillion).
Of the external debt stock, Afreximbank debt is at $360 million (about K630 billion) while TDB debt is at $371 million (about K650 billion).
Scottish-based Malawian economist Velli Nyirongo said in an interview on Tuesday that the situation is a concern though not entirely surprising development, observing that while these loans are not the largest in total value, their onerous repayment terms, including high interest rates and short maturities are putting a huge strain on Malawi’s already limited fiscal space.
He said: “The country’s external debt service obligations far exceed its capacity to pay, particularly after years of economic shocks, declining donor support and persistent current account deficits.
“Without a comprehensive and credible restructuring deal that includes these banks, Malawi will find it difficult to restore debt sustainability, regain access to new funding, or stabilize the economy.”
Treasury was yet to respond to our questionnaire by press time yesterday.
However, Minister of Finance and Economic Affairs Simplex Chithyola Banda is on record having said that government is determined to implement fiscal consolidation and that it has reached agreements with bilateral creditors on debt restructuring.
Treasury said government signed a supplemental agreement with Export-Import Bank of China, which is owed $201 million (about K352 billion) in debt as at September 2024.
Malawi’s debt is higher than the 65 percent recommended by global financial institutions such as IMF and the World Bank.
Debt payments take up 43 percent of the country’s domestic revenues, limiting the government’s capacity to spend on other budget lines.
In the K8.076 trillion 2025/26 National Budget, K2.17 trillion is for public debt interest payments.
