Use ECF to repay local debts, urges Chihana
Mzimba North legislator Yeremiah Chihana (Alliance for Democracy-Aford) has advised the Malawi Government to use International Monetary Fund (IMF) Extended Credit Facility (ECF) resources to settle some outstanding local debts.
Contributing to general debate on the Mid-Year Budget Review Statement that was presented on Monday by Minister of Finance and Economic Affairs Simplex Chithyola Banda, he said such a move would enable government to settle the loans at lower interest rates.
Said Chihana: “The international debt is about 57 percent and the local debt is about 47 percent, if the ECF is to be given to local banks, the market could be flooded with dollars which could ease pressure on the market.
“Instead of misusing this money, let’s give a chance to banks to start lending to the private sector. That way, government will have a multiply effect through tax.”
He said the country needs to retire the debts which were locally accumulated plus interest rates and increase money supply in the market to enable the private sector to develop.
“We should also revamp the mining sector so that it benefits the economy of the country. Let’s also invest in value addition other than selling our products to foreign traders at a cheaper price,” said Chihana.
IMF has approved Malawi’s four-year ECF worth $175 million.
Ministry of Finance and Economic Affairs data shows that by March this year, the country’s debt stood at K9.41 trillion, out of which K5.36 trillion is domestic debt. The total debt or $9.17 billion represents 75 percent of the country’s gross domestic product (GDP) out of which $3.95 billion is external debt, representing 32 percent of GDP. Domestic debt is equivalent to 43 percent of GDP.
Recently, the Malawi Government irked ActionAid following reports that Capital Hill used special drawing rights worth about $190 million—an international reserve asset created by the fund to supplement the official reserves of its member countries—to repay old loans, according to a report titled ‘Fifty years of failure: The International Monetary Fund, debt and austerity in Africa’.
