The country’s public debt evolution shows regimes throw caution to the wind towards and during elections. This has clearly been the case during the last four general elections, a period spanning 18 years when public debt has hovered between 84.7 percent of Gross Domestic Product (GDP) in 2003 rising to 107.4 percent in 2005 to the current 67 percent with the country enjoying spates of lower public debt stocks in between.
The trend could suggest political patronage and rent seeking by each successive administration, since 2003 when the ruling regimes have been borrowing with abandon either to fund their pet campaign projects or simply to pull wool over voters’ eyes so as to create the impression all is well.
It is a fact that no government borrows money without Parliamentary approval. But I can count with my fingers the number of times a money bill has been rejected in Parliament. Rarely do legislators block money bills. Once tabled in the House, they are passed at the speed of lightning because no member of Parliament or political party wants to be seen as standing in the way of development.
Constituents, on the other hand, are only too happy to see a road project coming up in their area. Never are they interested to know how much the project will cost, or the source of the money. Never does it occur to them by not questioning government when it borrows, they are mortgaging their children’s future to payday lenders who will demand their cut sooner than later.
Malawi’s all-time high public debt was 107.3 percent of GDP in 2005 a year after the second multiparty elections. It was also a year before multilateral donors cancelled $3 billion or 90 percent of the country’s public debt. But public debt had always been on the upward spiral reaching 84.74 percent of GDP in 2003. “Debt worsened between 2001 and 2004 mainly due to fiscal slippages which later resulted in suspension of the International Monetary Fund (IMF) programme and donor aid freeze” (Magalasi 2011).
Then came the short honeymoon with public debt—between 2006 and 2009—when Malawi enjoyed a low public debt portfolio that was also within the IMF and World Bank prescribed sustainability threshold of 15.8 percent to 20 percent of the GPD. Beyond that period it has all been debt distress.
From 2010 the country’s appetite for borrowing swirled again shooting to $2.2 billion or 15.8 percent of GDP rising to $6.03billion or 27.6 percent in 2012—when the country borrowed heavily to fix the fuel shortage crisis that rocked the country that year. Public debt continued to grow in 2013 reaching $5.57billion, then $6.05 billion or 62.7 percent of GDP the following year.
After dropping to $3.1 billion or 50.3 percent of the GDP in 2016, the following year saw public debt accelerate again to $8.79 billion, then $9.7 billion in 2018 and $10.6 billion in the 2019 when the country held the Tripartite Elections. It was to drop again to 50.7 percent in 2020 before increasing again to the current K4.1 trillion or 67 percent of the GPD.
IMF and Treasury project the public debt to grow to 78.2 percent of GPD by the end of 2021 before going up further to 81.3 percent in 2022 and 83 percent in 2023. It surely does not look good for Malawi which only 15 years ago had all its $3 billion debt stock with international lenders written off under the Highly Indebted Poor Countries.
Beyond 2023 it is unimaginable how the Tonse Alliance administration will avoid getting cornered into the same trap of borrowing extensively to finance its myriad campaign projects, especially as the election heat intensifies.
It is against this choking public debt burden on their shoulders—most of it inherited from the previous regime—that President Lazarus Chakwera and Finance Minister Felix Mlusu have twice this year asked for debt relief from multilateral donors. They simply do not see how they can navigate the tight fiscal space without having to kiss the very demon they are trying to avoid—borrowing; to construct the promised tarred roads, bridges, health facilities, buy drugs, bring potable water to the people, et cetera. The roads, drugs, health facilities, are the votes that every regime wants every electoral cycle.
It is a difficult terrain for the Tonse administration to maneuver but certainly not unmanageable.