Covid-19, debt, threat to investment—report
Malawi is slowly reverting to be coming an attractive investment destination, although lack of adequate vaccination against Covid-19 and huge debts remain threats to investors, a new report says.
A recent report released by the Africa Risk-Reward Index (ARRI) attributes the risk score decline to President Lazarus Chakwera’s ascendancy to power after the June 2020 Fresh Presidential Election.
In 2020, Malawi had a risk score of 5.79 which has now dismally declined by 0.29 to 5.50, while the reward has dismally decreased from 3.40 to 2.74. All these scores are measured out of 10 points.
Reads the report in part: “Malawi has seen its risk score decline since President Lazarus Chakwe r a came to power in a 2020 re-run presidential poll that reaffirmed Malawi’s democratic credentials.
“A similar demonstration of democratic strength occurred in Zambia on August 12, when the opposition United Party for National Development [UPND] won against an incumbent administration with authoritarian tendencies.”
However, the ARRI report, produced by global specialist risk consultancy Control Risks and Oxford Economics Africa , observes that Malawi and Africa’s high debt burdens remain a concern over the coming years as the debt could affect investors even if they are not directly exposed to sovereign risks.
By the end of 2020, debt-to-GDP [gross domestic product] on the continent was above 40 percent.
The International Monetary Fund recently stated that 48 out of Africa’s 54 countries are debt-burdened while 17 countries in sub-Saharan Africa are in debt distress.
Currently, Malawi’s sovereign debt standing is at K4.8 trillion and the World Bank recently warned that a sudden rise in sovereign borrowing costs could instigate fiscal pressures on the economy.
In an interview yesterday, Catholic University of Malawi head of economics Hopkins Kawaye said the country must live within its means to curb unnecessary borrowing.
He said the government has a heavy appetite for borrowing to fulfil campaign promises.
“Politicians are bent on winning the next election, without necessarily looking at the practicality of their promises based on the performance of the economy,” said Kawaye.
He warned that continued creation of budgets beyond the collected revenue will only worsen government’s debt.
On Covid-19 vaccines, the ARRI report observes that while case numbers are starting to decline after third wave, vaccine rollouts in Africa remain slow and spikes that might scare off investors are possible.
The ARRI presents country reports showing investment challenges and opportunities based on assessment of political and economic factors
