The Reserve Bank of Malawi (RBM) says it has negotiated better debt restructuring terms with Afreximbank and Trade and Development Bank (TDB) following a fall-out with the International Monetary Fund (IMF).
But in June this year, Afreximbank said it was not engaged in debt restructuring negotiations related to any of its member countries, including Malawi as doing so would be inconsistent with the bank’s establishment treaty.
As part of efforts to qualify for the four-year $175 million (about K306 billion) Extended Credit Facility, which automatically terminated on May 15 this year, IMF had set addressing unsustainable public debt as one of the prerequisites for its support.
In his remarks during the RBM Monetary Policy Committee Technical Meeting in Blantyre in Blantyre on Wednesday, RBM director of capital markets and microfinance supervision Mark Lungu said the terms brought on board by IMF included restructuring the debt with the regional creditors to 30 years, with 17 years of moratorium and repayment of 13 years.
He said in the new deal, RBM has negotiated that some of the loans be repaid in local currency while the others in dollars as these regional creditors have business interests in Malawi and that payment has started.
“We believe that we are going to reach a breakthrough that is going to be good for the country going forward,” said Lungu.
Between 2012 and 2020, the Malawi Government contracted several foreign currency-denominated facilities with different external creditors for which repayments started after June 2020, according to RBM.
As at 2023, the central bank said the total debt amounted to approximately $1.2 billion (about K2.1 trillion) of which $800 million (about K1.4 trillion) was contracted from Afreximbank.
Of the amount, $350 million (about K612.9 billion) was contracted by the RBM on behalf of the government while $450 million (about K788 billion) was contracted by RBM for its own books.
However, data contained in the RBM Report and Accounts for the Year ended December 31 2024 show that the Malawi Government secured a note facility from Afreximbank, represented by RBM to finance various trade and trade-enabling initiatives, amounting to up to $350 million.
The data also show that RBM entered into a committed facility with TDB where TDB makes available to the bank a revolving multi-tranche special commodity and trade financing facility in form of a dollar denominated uncommitted drawdown in an aggregate amount equal to $307 million (about K538 billion).
In May this year, United Kingdom-based global affairs think- tank ODI Global said Malawi, alongside Zambia and Ghana were finding it difficult to finalise debt restructuring negotiations with Afreximbank and TDB.
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.
Economist Bond Mtembezeka said in an interview that failure to restructure the country’s debt would be catastrophic for the economy.
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 recorded at $4.27 billion (about K7.4 trillion).
Afreximbank is an Egyptian-based institution that provides financing and advisory services for intra and extra-African trade while TDB, formerly PTA Bank, is a trade and development financial institutions operating in eastern and southern Africa.
