Minister of Finance, Economic Planning and Development Goodall Gondwe has rejected fears from economic commentators that Malawi government’s borrowing has reached a critical stage as the country’s debts have gone beyond the fiscal policy, saying although there is huge debt the country has not yet reached the threshold of the international standard which is 50 percent of the Gross Domestic Product (GDP).
Gondwe was responding to a question by Karonga Central member of Parliament (MP) Frank Mwenifumbo (Alliance for Democracy –Aford) on whether government has plans within the National Planning Commission to streamline the borrowing in order to concentrate on megaprojects that can turn around th e country’s economy.
“ In this case, just to borrow a leaf from the Eastern African Tigers of Rwanda, Uganda, Kenya and Tanzania; the way their economy is growing. They have concentrated on improving railway infrastructure in order to bring down the cost of importation.
“For example, Malawi is a landlocked country and the biggest chunk of our cost, is on transportation. So, can [Minister of Finace] assure this House if government at all has plans to embark on mega infrastructural projects like railway lines in order to bring the cost of importation down,” said Mwenifumbo.
In his response, Gondwe said government “certainly” have such plans.
However, the Finance Minister said the trouble about plans is that they do not always coincide with what has to take place in order for those plans to be translated into realities.
“You will recall that one time, we had hoped that we would find an amount of US$6 billion at once for us to connect ourselves to Mozambique and have our own port there [Nsanje World Inland Por]. Although that was a very good plan, we could not really obtain US$6 billion at once. So, in most cases, that is a problem that we have had,” said Gondwe.
The Nsanje Port project was one of former president Bingu wa Mutharika’s “colour dreams” and sought to connect Malawi to the Indian Ocean port of Chinde in Mozambique through Shire and Zambezi rivers over a distance of 235 kilometres, which could have been the shortest route to the seas; thereby contributing to low transport costs for both imports and exports.
Gondwe also said he would not call Rwanda and Uganda as tigers in the sense that Mwenifumbo meant in his question.
“I think that when you look at where we were and where Uganda was in 1994, and where the countries are now, you calculate the rate of growth that has taken place; you will find that we are not far behind. Or sometimes, we were quite in front of them because we started on a low scale than most of our colleagues in Zambia. I think Zambia was almost three times as large as we were and Zimbabwe the same thing,” said Gondwe.
“So, I will be a little bit careful. I know that it is a fashion now in Malawi to think that everything that Malawi is doing is not being done very well. This is not quite true. If you look at the figures, in a number of cases, you will find that we have done extremely well,” he added.
Gondwe said he was “ very surprised” by press reports that “even the so called economic commentators” felt that Malawi government borrowed an astronomical figure that really showed that government is bit irresponsible.
“In fact, if you will look at $6 billion and relate to what we have done so far, the figure is not as alarming as you would think,” he said.
“In my opinion, it is important and certainly they [economic commentators] are right that we should be very careful in how we borrow. We must make sure that what we borrow is spent on productive projects, that is the most important thing and I agree with that,” he said.
However, the country;s purse keeper cautioned legislators and economic commentators that “when they seem to think that we have done worse than any other country. That is not true.”
He said: “ We have done quite well in some cases and that is not to say that we could not have done better. I think we could have done better. Every country could have done better. Nevertheless, the situation is certainly under control.”
During the current sitting of Parliament, Malawi Congress Party (MCP) member of Parliament (MP) for Lilongwe Mpenu Nkhoma Collins Kajawa also criticised the country’s borrowing.
Kajawa said a lot is being borrowed yet no fruits are seen from the debts, putting citizens at the peril of paying the accumulated arrears generating from the borrowing and also leaving the country operating on a zero budget.
For instance, Kajawa said the country has been borrowing for irrigation and water development, yet there is nothing on the ground to show for it.
“Looking at the financial years, currently government has borrowed up to $2.7 billion. For agriculture alone, we have borrowed $785 towards irrigation, yet we [have not achieved] much in irrigation and water development. Why can’t we come up with mechanisms that will benefit communities?” he said.
Kajawa also said the increasing national debt is affecting the private sector because government borrows a lot from commercial banks where the private sector also borrows which in turn leaves the private sector servicing exorbitant interests.
He, therefore, suggested that the country focuses on borrowing for investment rather than for consumption.
Meanwhile, Parliament has authorised the government to borrow $160 million (about K117 billion) from the World Bank to finance an ambitious agricultural project in the Shire Valley.
The project seeks to increase agricultural production through irrigation and support to farmer organisations.
The Shire Valley Transformation Project is expected to run for a period of 14 years from 2017 at a total value of $575 million to be funded through loans from the World Bank, African Development Bank (AfDB) and the Government of Malawi.Follow and Subscribe Nyasa TV :