Treasury has spent K993.6 billion in interest payments in the past five years, Business News has established.
This money could have funded about 10 budget lines in the 2019/20 fiscal year.
An analysis of Ministry of Finance draft financial statements between financial years 2015/16 and 2019/20 shows that interest payments on debt has increased by 97 percent from K132.6 billion to K261.6 billion over a five-year period.
The figures show that of the K993.6 billion, about K925.3 billion is for domestic payments while K68.2 billion is for foreign payments.
For instance, in the 2019/20 financial year, Treasury spent K216.6 billion on interest payments, which is equivalent to 4.2 percent of the revised 2019/20 K1.84 trillion National Budget.
The money was enough to finance the expenditure lines for the 2019/20 financial year for social benefits, including subsidy programme, pension and gratuities and social cash transfer (K123.9 billion), health (K54.3 billion), agriculture (K9.3 billion), education (K29.6 billion), maize purchase (K10 billion), utility arrears (K7 billion) and elections (K30 billion).
In an interview last week, Centre for Social Concern (CfSC) economic governance programme officer Benard Mphepo said in the past three years, public debt has been on the rise, with external debt and domestic debt growing at an annual average of 5.2 percent and 51.8 percent, respectively.
He said on average, 14 percent of the budget is being used to service loans domestically while one percent foreign loans.
Said Mphepo: “Public debt interest payments have been increasing every year, which reduces provision of social services and disposable income for citizens since the government tends to increase taxes.
“Authorities need to do careful scrutiny of new loans to ensure that any new borrowing should be directed towards highest priority productive sectors of the economy.”
In recent years, domestic borrowing has continued to expand through Treasury notes as the government has been implementing a deliberate strategy to lengthen the maturity profile of domestic debt.
This has resulted in the shift of domestic debt holdings from Treasury bills to Treasury notes.
However, increasing domestic borrowing has contributed to a substantial increase in interest rates on government borrowing.
In its July 2020 Malawi Economic Monitor, the World Bank warned that the consistent financing of fiscal deficits by high cost domestic borrowing has led to a recent surge in domestic debt and is expected to rise further.
Malawi’s stock of public debt is at 59.4 percent of gross domestic product (GDP), with the stock of external debt at 29.7 percent of GDP.
In terms of nominal value, the country’s public debt stock is estimated to have climbed to over K3.7 trillion, a significant surge from K3.1 trillion recorded in 2018.