World bank rues rising debt levels
The World Bank has expressed concern with Malawi’s elevated debt levels, saying it is pushing the country to extreme ends, thereby limiting fiscal space due to debt service costs.
The Bretton Woods institution’s concern follows rising public debt, which has peaked at K6.38 trillion, more than double this year’s national budget pegged at K2.8 trillion.
In its latest Africa’s Pulse, a biannual publication that analyses issues shaping Africa’s economic future, the World Bank said that rising public debts in Malawi and other sub-Saharan African countries are projected to remain high at about 58.6 percent of gross domestic product (GDP).
The report further indicates that while most non-resource rich countries such as Malawi rebounded strongly from the 2020
private creditors have also been the main contributors to debt accumulation as sub-Saharan African countries, including Malawi, shifted from reliance on multilateral debt to accessing international financial markets for debt finance.
Reads the report in part: “China alone accounted for 59.3 percent of total official bilateral debt in 2019 where Comoros and Malawi benefited more from these compared to others.
“As a result of this shift, non-concessional external debt has stagnated while
external debt has risen sharply, a rising debt levels in selected countries.”
In a statement accompanying the report, World Bank chief economist for Africa Andrew Dabalen warned against subsidies such as the Affordable Inputs Programme, saying this will weigh on public finance and increase public debt further.
Reacting to the report yesterday, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni urged fiscal authorities to be prudent, saying the debt
has become dangerous for the macroeconomic environment.
“Government business should not be crippled, but borrowing in this manner is worrying and concerning,” he said.
Meanwhile, the Annual Public Debt Report from the Ministry of Finance and Economic Affairs Debt and Aid Management Division shows multilateral creditors continued to account for the largest proportion of Malawi’s external debt and the share increased by 17 percent in June 2021.
Commercial creditors followed and increased holdings by eight percent.
