Malawi’s increasing external debt stock continues to come under the spotlight with fresh figures from the World Bank report showing that external debt has risen to $2.168 billion (about K1.58 trillion) from $1.847 billion (K1.35 trillion) the year before.
The International Debt Statistics, which is the World Bank’s compilation of statistics covering external debt and financial flows of 121 low and middle income countries during 2017 shows total exports for the country marginally rose to $172 million (about K125 billion) from $151 million (about K110 billion) in the year before.
Malawi’s external debt figures in the review period represent an approximately 17.3 percent increase compared to the prior year, raising fears the situation could be unsuitable if left unchecked.
University of Malawi’s Chancellor College economics lecturer Lucius Cassim, in an interview yesterday, feared the growing external debt is a burden on future generation, and could lead to increased taxes.
“Increased borrowing means an increased burden on the future generations and the economy at large. We fear that if left unchecked, we may see Malawians being heavily taxed to enable government service the loans which may in the end strain the country’s economic growth,” he said.
Cassim argued that if authorities manage the country’s domestic resources properly, the country could reduce borrowing from both external and internal sources.
He said: “Over the years, we have seen government misusing public resources. This in the end leaves us no choice but to borrow from both domestic and external sources.
“The important thing for us to do now is to manage public funds because this is the major factor contributing to increased borrowing.”
Malawi’s public debt has increased rapidly since the country got a relief of its external debt in 2006, a development analysts say consumes about 15 percent of the national budget in interest payment alone.
Available figures show that Malawi has in the past 10 years spent K123 billion on debt servicing and that is required to cover the repayment of interest and principal on debt for the period, out of which K52 billion was interest payments.
In September 2006, the International Monetary Fund (IMF) and World Bank wrote-off Malawi’s $2.9 billion (about K2.1 trillion), which totalled 90 percent of the official foreign debt.
This reduced Malawi’s debt to around $400 million (about K295 billion). n