Malawi’s Public Debt Surges to K16.19 Trillion Amid Fiscal Concerns

Malawi’s public debt has surged to K16.19 trillion as of September 2024, reaching 86.4% of GDP. Minister of Finance Simplex Chithyola Banda announced agreements with creditors to restructure debt, which could relieve foreign exchange pressure. The government plans to strengthen debt management, engage in concessional borrowing, and prioritize projects for national development.

As of September 2024, Malawi’s public debt has escalated to K16.19 trillion, representing an alarming 86.4% of the nation’s GDP. This significant increase was disclosed by Minister of Finance Simplex Chithyola Banda during the presentation of the national budget for 2025/2026. The current external debt is K7.39 trillion, while the domestic debt amounts to K8.79 trillion. The government’s heavy reliance on borrowing to finance its expenditures has been a notable factor contributing to this surge in debt.

Minister Banda mentioned that the government is actively engaging with official bilateral creditors and negotiating with commercial creditors to restructure its debt obligations. He expressed optimism that completing these negotiations would alleviate pressure on the foreign exchange reserves and create necessary fiscal space for productive investments. “Once the negotiations are completed, the initiative will ease the pressure on foreign exchange and provide fiscal space necessary for productive investment,” he said.

To address the rising debt levels, the government intends to enhance debt and cash management practices. This includes contracting concessional loans and directing borrowing efforts towards priority sectors of the economy. Furthermore, he emphasized the importance of innovative financing strategies, stating, “To tame the growing debt, the Government has stepped up its efforts to strengthen debt and cash management.”

Key strategies outlined include implementing commitment controls, limiting guarantees issued, and developing a robust framework for managing guarantees and borrowing by state-owned enterprises. Additionally, the government has initiated the Integrated National Finance Framework aimed at diversifying resource mobilization to support sustainable national development.

In conclusion, Malawi’s public debt has reached a critical point, necessitating urgent government intervention. The administration is focusing on debt restructuring and enhanced management strategies to mitigate the financial strain. Emphasis on priority sectors and innovative financing is crucial for sustainable growth and development. Minister Banda’s statements reflect a proactive approach to managing the debt crisis while aiming for fiscal stability.

Original Source: malawi24.com