Mejn says Malawi can raise money for debt fund

Malawi Economic Justice Network (Mejn) says Malawi has the potential to raise the seed capital for debt retirement, which is yet to kick start, three years on.

At the time of incorporating the fund into the amended Public Finance Management Act, Treasury said they intended to allocate some seed resources to the fund by, among others, levying some goods that people consume such as beer and cigarettes.

In a written response to a questionnaire on Friday, Mejn executive director Bertha Phiri said having the fund running is pertinent.

She said: “Let me begin by saying the need to have a seed capital to kick start the operationalisation of the debt retirement fund, in itself it is pertinent. What is important to note is the percentage of levy that can be introduced on cigarettes and beer.

“The Malawi Household Survey 2016 indicates that 14 percent of Malawi population consumes beer and 11 percent are in cigarettes. The details, however, are in the figures, as in how much is the percentage of the levies to the price of the two products.”

The amendment and subsequent assenting to the Public Finance Management Act, among other things, entailed the operationalisation of the Debt Retirement Fund to be used to service the ballooning public debt.

The legislation for the establishment of the fund was embedded into the Public Finance Management Act amendment which Parliament passed in the 2021/22 financial year, and was recently assented to by President Lazarus Chakwera.

At the time the fund was created, public debt stock stood at K5.5 trillion. But now, Malawi’s public debt has risen to K7 trillion, with K4.43 trillion being domestic debt while K3.47 trillion is external debt.

Last week, Minister of Finance and Economic Affairs Sosten Gwengwe said Treasury is currently looking for seed capital for the fund, pending Malawi Government’s dreams of managing its ballooning public debt.

He said the amount to be invested will depend on the contribution from “partners”.

Said Gwengwe: “Debt restructuring processes took precedence, but all legal formalities for the Debt Retirement Fund are complete.

“We need seed capital for the fund and those to help us are helping with the current restructuring process. Our fiscal space is too tight.”

Meanwhile, Malawi Government is engaging its creditors to restructure the debt to ensure that it accesses funds under the International Monetary Fund (IMF) Extended Credit Facility.

Earlier, the Budget and Finance Committee of Parliament said the delay to roll out the fund means that the government is not serious about dealing with the debt issue.