Report shows Malawi, 4 others in worst debt crises

Malawi is among five African economies with the worst debt crises in 2023, according to an African news platform The East African.

The platform reported that Malawi, Ghana, Zambia, Tunisia and Egypt continue to face macroeconomic challenges that hinder their economies from servicing debt to grow their economies.

Reads the analysis in part: “Malawi is dealing with currency shortages as well as a budget deficit of K1.32 trillion [$1.3 billion], or 8.7 percent of the gross domestic product [GDP].

“The donor-dependent southern African country is attempting to restructure its debt to get further International Monetary Fund [IMF] money, which was authorised in November.”

The East African says inflation, rising borrowing rates and a strong dollar have made repaying debts and generating funds much more difficult for dozens of poor countries, including Malawi, forcing some to default.

Ministry of Finance and Economic Affairs data shows that as at end December 2022, total public debt reached K7.9 trillion, representing 69.93 percent of GDP.

Out of this stock, K4.43 trillion is domestic debt, which is 114 percent of the total budget while K3.47 trillion is external debt, an equivalent of 90 percent of the total budget.

The ministry data further shows that the amount of money needed to repay the principal and interest on a debt has been rising from K261 billion in the 2019/20 financial year to a projected K914 billion in the current financial year.

During the review period, fiscal deficit has risen from K162 billion in the 2019/20 financial year to K1.3 trillion in the 2023/24 financial year.

Minister of Finance and Economic Affairs Sosten Gwengwe said in an interview on Friday that Treasury has made progress to restructure the country’s external debt to secure a new programme with the IMF.

“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,” he said.

Gwengwe said the Malawi Government is also engaging creditors and has already held meetings with major creditors, especially the Afrexim Bank, Trade and Development Bank and bilateral lenders such as China and India.