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Private sector external debt stock hits K2.6tn

The private sector external debt stock (Psed) accumulated to $2.5 billion (about K2.6 trillion) by 2021, published National Statistical Office (NSO) data has shown.

This is according to the 2021 Malawi Foreign Private Capital (FPC) survey jointly carried out by NSO, Reserve Bank of Malawi and the Malawi Investment and Trade Centre (Mitc) from April 25 to May 20 2022, collecting data on stocks for 2019, 2020 and 2021 and flows for 2020 and 2021.

According to the data, transportation and storage industry accounted for the largest portion  (79.5 percent) at $1.98 million (about K2.1 trillion), followed by the agriculture, forestry and fishing industry (6.2 percent) at $154.1 million (about 159.6 billion) and the manufacturing industry (4.2 percent) at $104.1 million  (about K107.8 billion).

In an interview on Wednesday, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Lekani Katandula said the chamber would need to evaluate whether the proceeds were used productively and can generate enough to repay the loans or not.

He, however, said, looking at the current forex situation and the debt stock, profitability of firms could be affected.

He said: “The scarcity of forex will have negatively impacted the profitability of import dependent enterprises whilst boosting the viability of exporters and those producing import substitutes.”

On his part, National Working Group on Trade and Policy chairperson Frederick Changaya said it is a worrisome development, especially looking at the sectors leading.

“If it were say mining, perhaps manufacturing and other capital-intensive economic activities, one would remain in hope. Point is, the purpose of the foreign debt matters. The benefits from foreign debt matter.

“It is hoped that once players borrow abroad, local banks should be awash with cash to lend. This means lower interest rates hence lower inflation which ordinarily should strengthen the currency. This is not the case. So, it tells you, as an economy, we have underlying economic and financial systems challenges.”

In May last year, Reserve Bank of Malawi devalued the kwacha by 25 percent against the dollar, which according to the central bank was necessary to align the foreign exchange supply to the macroeconomic fundamentals as well as ensure supply in the formal market.

This saw the local unit fall to K1 030 per dollar from the previous K825. However, cash sells were at around KK1 450 against the US dollar.

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