Five years after international lenders wrote off 90 percent of our countryÃ¢â‚¬â„¢s $3 billion foreign debt under the Highly Indebted Poor Countries (Hipc) initiative, we are slowly drifting back into heavy indebtedness.
Borrowing itself is not bad, as long as it adds value and the debt can be settled within an agreed time without driving the borrower into liquidation and utter ruin.
This time around, government has borrowed some $200 million to stabilise the economy. Part of the funds would be used to import fuel, so we are told. In simple terms, we are mostly borrowing for consumption rather than production, which is unhealthy.
I recall sometime last year when, after some observers expressed concern about increased borrowing, then Finance Minister Ken Kandodo described as “moderate”, the $311 millionÃ¢â‚¬â€and it could be more Ã¢â‚¬â€Malawi had accumulated since debt relief.
I found that to be a pale attempt to justify governmentÃ¢â‚¬â„¢s over-indebtedness against the backdrop of recent global recession. Add the $311 million (plus/minus) to the $522 million that remained after the debt relief and the level of national indebtedness becomes too colossal for this poor country to bear.
And, according to the 2011 economic report from the Reserve Bank of Malawi (RBM), outstanding public external debt closed the second quarter (April-June) of 2011 at $848.1 million. Add to that amount the $200 million, you are over the $1 billion mark! Then recently, RBM announced the K30 billion bond which in essence is government borrowing.
Since independence, Malawi has borrowed extensively to fund capital projects on grounds that these would benefit the nation, but what impact has all this had on the economy and on the people of this country? Has central government conducted studies to find out if we had returns on all these investments?
There are also other realities for us to consider. Malawi is not an island. It is part of a global family of developed and developing nations. Even as we speak, some of the richest nations in the world are making drastic cuts to public expenditure, implementing austerity measures to save their people from drowning in the whirlpool of national debt. I think these are lessons we should be learning from them.
Today, we are saying we are “within the acceptable levels” to sustain our debt. I may not have been born many rains ago, but before reaching the pre-2006 unsustainable debt levels, the country was also in the current position. The current positive ratios are merely statistics worked out using a formula which can change any time.
Why are we borrowing more? If we are not careful, we run the risk of mortgaging this country and its people to Shylocks who will one day demand their pound of flesh.