Multilateral solutions in debt crisis—UN

The United Nations Commission for Trade and Development (Unctad) says stronger multilateral solutions are urgently needed to tackle the debt crisis facing developing countries.

In a statement published on its website, www.unctad.org, the commission’s secretary general Rebeca Grynspan said government debt levels as a share of the gross domestic product (GDP) has increased in over 100 developing countries between 2019 and 2021.

She said excluding China, this increase is estimated at about $2 trillion.

Said Grynspan: “This has not happened because of the bad behaviour of one country.

“This has happened because of systemic shocks that have hit many countries at the same time.”

She observed that with interest rates rising sharply, the debt crisis is putting enormous strain on public finances, especially in developing countries that need to invest in education, health care, their economies and adapting to climate change.

“Almost all developing countries have been left to face an impossible trade-off in a context marred by a pandemic, geopolitical instability and climate distress,” Grynspan said.

“Debt cannot and must not become an obstacle for achieving the 2030 Agenda and the climate transition the world desperately needs.”

Treasury figures show that as at end-September 2022, Malawi’s total public debt stood at K7.3 trillion, up from K6.38 trillion in March 2022, an increase of 14 percent. 

External and domestic Debt accounted for 45 percent (K3.3 trillion) and 55 percent (K4.0 trillion) of the total debt, respectively.

 As a percentage of GDP, the total debt in nominal terms stands at 64 percent.

Meanwhile, it expected that foreign borrowing will amount to K189.7 billion and net domestic borrowing will be K127.1 billion.

In his Mid-Year Budget Statement, Minister of Fiance and Economic Planning Sosten Gwengwe said the rising public debt is on account of several related factors including persistent budget deficits; suspension of budgetary support from development partners and clearing of arrears incurred in previous fiscal years.

“The country’s debt situation has also been driven by natural economic shocks like the Covid-19 pandemic and cyclones which negatively affect both revenue and expenditure,” he said.