Minister touts progress on debt restructuring
Minister of Finance and Economic Affairs Sosten Gwengwe says Treasury has made progress in its bid to restructure external debt and secure a new programme with the International Monetary Fund (IMF).
In an interview on the sidelines of the 2023/24 Pre-Budget Consultations Meeting in Blantyre on Monday, he said Treasury is in discussion with some of the country’s large creditors for a possible restructuring of its external debt.
Said Gwengwe: “We have multiple ways of how we are addressing public debt, one of it is budget optimisation, a budget that reduces the need for domestic borrowing.
“We are also engaging our creditors. We have had meetings with our major creditors, especially the Afrexim Bank, Trade and Development Bank and we have also reached out to bilateral lenders, China and India being the prominent ones and we are currently in discussion with them as we move towards the Extended Credit Facility.”
He said Treasury needs assurances from these creditors that they can buy into its proposition for debt restructuring.
“We have our debt strategy which we shared with them and we will continue meeting with them in the hope that we should be able to reach a good compromise,” said Gwengwe.
In recent years, the composition of external debt has shifted toward commercial creditors at non-concessional terms, thereby increasing debt-servicing costs.
World Bank data shows that as of March 2022, commercial lenders held 23 percent of external debt or 9.8 percent of the country’s gross domestic product (GDP) while multilateral and bilateral creditors held 64 and 13 percent of external debt respectively.
In June last year, IMF said Malawi needed to address debt sustainability and resolve the misreporting to qualify for a new Extended Credit Facility with the fund.
Said IMF senior economist at the Africa Division Mika Saito in a statement: “While IMF support and its catalytic role in mobilising donor support are critical at this juncture, being able to restore debt sustainability and resolving the misreporting case are pre-requisites for such support
