Malawi’s debt situation is worrying after Ministry of Finance spokesperson Nations Msowoya confirmed that the country is owing foreign institutions $1.9 billion (about K1.31 trillion) while domestic borrowing is at K0.7 trillion.
The development is worrying as a significant amount of the budget and foreign currency is shipped out of Malawi to repay the foreign debts owed to multilateral and bilateral creditors when such resources should have been reinvested in the country while shoring up its balance of payment position.
Parliamentary Committee on Budget and Finance, Rhino Chiphiko, expressed concern especially about the Chinese and Indian loans because Malawi government was not transparent on how they were contracted.
“These loans were approved as a blanket by the then Parliament. They were in phases, but up to now government has not come in the open to say how much we have used and how much remains because I am sure interest rates must be very high,” said Chiphiko.
He urged government to slow down on contracting new loans to allow Parliament to scrutinise the current debt portfolio.
According to Chiphiko, some loans did not make sense, citing the borrowing from China to build the Presidential Villas and hotel in Lilongwe and wonder “what it is that Malawians are gaining from the Presidential Villas because at the end of the day it is Malawians, not the infrastructure, who are going to repay the loans through their taxes.”
Msowoya, however, defended the excessive borrowing as “normal”.
“We are not mortgaging the future of Malawians as some people are saying,” said Msowoya as quoted in the Daily Times of Wednesday November 30, 2016.
The flagship newspaper, The Daily Times has also criticised the excessive borrowing in an editorial comment titled ‘Government borrowing is killing this country.”
The paper agreed with at University of Malawi’s Chancellor College economics professor Ben Kalua that government’s borrowing would have made sense if it were meant to finance production.
“Unfortunately, for Malawians, the borrowing goes directly to bankroll consumption,” the paper noted.
It called the K2.1 trillion debts harmful to the nation against a background of K1.1 trillion national budgets which parliament approved.
The paper noted that commentators have expressed concern that government is mortgaging the future of this country through debt.
It urged the MPs to start taking government to task as to how it used the debts.
World Bank states that Malawi’s public debt has increased sharply over recent years with servicing costs now close to levels recorded prior to the 2006 debt relief.