By Twink Jones Gadama
Malawi's escalating public debt, now standing at a staggering K15.17 trillion, has sparked grave concerns from international partners, including the World Bank and the United States. The country's fiscal position is under scrutiny, with experts warning of suffocating effects on other sectors and potential inhibition of private investment.
According to World Bank Country Manager Firas Raad, Malawi’s public debt, equivalent to 81% of its gross domestic product (GDP), is unsustainable and stifles growth, particularly affecting vulnerable citizens. The bank notes that the government’s high budget deficits over the past two years have driven up domestic debt.
“To put this into perspective, in the 2024/25 financial year, out of a total debt service of K1.67 trillion, only K447 billion is owed to external creditors,” Raad emphasized. “Stabilizing domestic borrowing is urgent,” he added.
The World Bank has shifted its focus to grant financing, disbursing over $1.6 billion (K2.7 trillion) to Malawi since 2022, with nearly $1 billion (K1.7 trillion) being grants.
Meanwhile, the US Embassy’s Public Affairs Officer, Grant Phillipp, cautioned Malawi against delaying debt restructuring agreements with international creditors, which could undermine its agreements with the International Monetary Fund (IMF) and bilateral creditors.
“Malawi should address low revenue collection, ballooning expenditures, and delayed implementation of the Integrated Financial Management and Information System (IFMIS),” Phillipp advised.
The US provides approximately $350 million (K606 billion) per year in bilateral assistance to Malawi, primarily in grants or cooperative agreements.
Economist Bond Mtembezeka stressed the need for efficient allocation of aid, citing resource shortages swelling public debt.
In its annual public debt report for June 2024, the Ministry of Finance and Economic Affairs revealed that the International Development Association (IDA) is Malawi’s largest creditor.
Secretary to the Treasury Betchani Tchereni acknowledged progress in debt restructuring with most creditors and securing support from development partners.
However, Minister of Finance and Economic Affairs Simplex Chithyola Banda was unavailable for comment.
As Malawi navigates its debt challenges, experts urge fiscal consolidation and prudent management to prevent further economic strain.
