Malawi Economic Justice Network (Mejn) executive director Bertha Phiri says the country’s public debt could continue rising in the face of weak domestic resource mobilisation streams.
Phiri’s sentiments follow Treasury data showing that as at September 2024, public debt has hit K16.2 trillion, representing 86.4 percent of gross domestic product (GDP)
In an interview on Sunday, she said: “Almost two national budgets making up the total debt stock. Measures that are put in the budget are not very encouraging because you can even appreciate that projections for revenues they say its K5.5 trillion, but with other recurrent transactions, it is adding up to K6 trillion plus, and already there is a deficit.
“The deficit is being financed by domestic borrowing so we continue to dig a pit and also taking much more resources into servicing debt.”
According to Phiri, when the remaining portion of the K1.5 trillion 2024/25 estimated borrowing is factored in, the debt stock would close the fiscal year around K17 trillion.
On the other hand, with the just presented 2025/26 budget estimating borrowing at K2.4 trillion, the debt stock is likely to jump to K19 trillion within a year, exerting further pressure on projects financing as the revenues will continue being squeezed by debt servicing obligations.
According to the budget statement, external debt reached K7.39 trillion, while domestic debt amounted to K8.79 trillion, but Minister of government is determined to implement fiscal consolidation and debt restructuring to make public debt sustainable.
In a separate interview, National Planning Commission director general Thomas Munthali said the budget deficit and borrowing projections were inevitable due to inflation pressure, but has cautioned Treasury to make sure it does not go beyond the K2.4 trillion borrowing limit.
“Yes, the deficit has gone up, but that’s expected because inflation pressure would necessitate that to go up. What we only hope, is that they will manage it to get where it is, but again it’s dependent on how the economy performs.
“The most important thing is let’s follow through with the strategies that are still in place now. Treasury should make every effort to track that whatever resources are going to Ministries, Departments and Agencies are really doing the intended purpose,” Munthali said.
In his budget presentation, Minister of Finance and Economic Affairs Simplex Chithyola Banda stressed that government is determined to implement fiscal consolidation and that it has reached agreements with bilateral creditors on debt restructuring.
Chithyola said: “Once the negotiations are completed, the initiative will ease the pressure on foreign exchange and provide fiscal space necessary for productive investment.
The most ideal way of dealing with the unsustainable debt is by enhancing the country’s domestic revenue mobilisation to cover Government expenditure without recourse to further borrowing.”
However, Phiri said debt restructuring on its own may not be a solution to Malawi’s problems because it is just mortgaging the future by asking for grace period on repayment period.
