Malawi’s rising public debt –combination of domestic and foreign–has been described by Minister of Finance, Economic Planning and Development Joseph Mwanamvekha as worrisome.
The debt stock, according to Annual Debt Report by the Ministry of Finance, Economic Planning and Development, jumped to K3.7 trillion or 65 percent of GDP during the 2018/19 financial year from K3.1 trillion recorded at the end of the previous year.
The Malawi debt stock comprises K1.7 trillion external debt and K1.97 trillion domestic debt.
Finance minister Mwanamvekha said in his 2020/21 National Budget Statement last Friday said that the rising public debt is a major worry for the Malawi Government.
“Its impact on budget implementation is enormous as interest payment is a statutory expenditure that can never be deferred or cut in the event of resource constraints,” said Mwanamvekha.
He highlighted that the high debt repayment bill is on account of Treasury Securities which were issued between 2014/2015 and 2017/2018 financial years to clear huge government arrears that were accumulated between 2012 and 2014.
“Government is however, fully committed to tame the accumulation of domestic debt by prioritizing spending and strengthening its debt management function,” said Mwanamvekha.
He added that government will ensure “prudent borrowing” and seek to contract external loans on concessional terms where possible.
Economics Association of Malawi (Ecama) statistics show that debt to gross domestic product (GDP) ratio has a maximum threshold of 50 percent with 20 percent being domestic debt and 30 percent foreign debt.