14 March 2019

Malawi At Risk of Economy-Crippling Debt, IMF Warns

The International Monetary Fund (IMF) has warned that Malawi is at growing risk of debt distress because of heavy borrowing, advising government to keep borrowing to a minimum and only procure loans that are concessional.

Gondwe: Hopeful IMF will commit next disbursement

IMF resident representative Jack Ree said this at the completions of the second review under the Extended Credit Facility.

The fund said Malawi urgently needed to cut debt levels.

Government plans to borrow K214bn domestically to cover for budget deficit which has come about due to non disbursement of budgetary support.

According to the IMF assessment for the first half of the financial year, Malawi has missed one target as a result of frontloading funding to Malawi Defence Force (MDF), Police and Malawi Electoral Commission cater for elections.

Minister of Finance Goodall Gondwe is hopeful that the IMF will commit the next disbursement under ECF.

IMF warning comes after opposition legislators also cautioned government to stop borrowing both domestically and internationally, noting that the debts have now reached K3.3 trillion.

Lilongwe Mpenu Nkhoma member of Parliament (MP) Collins Kajawa said Malawi Congress Party (MCP) will no longer support any borrowing as the figures have soared in the first six months.

People's Party spokesperson on Finance John Chikalimba reiterated the MCP position, saying it was sad that government mentioned economic growth when people are still living in abject poverty.

University of Malawi's Chancellor College economics professor Ben Kaluwa is on record saying government authorities need to look beyond economic stability and focus on taming rising inequality, growing poverty and population.

Malawi's poverty levels remain widespread at 51.5 percent nationwide as at 2017, up from 50.4 percent in 2010, according to the African Development Bank (AfDB).

In rural areas, the report states that poverty stands at 56.6 percent and this extreme poverty is largely because of food insecurity.

On the other hand, Malawians' incomes are low with GNI per capita of $360 (about K263 000) in 2016, AfDB figures show. GNI per capita is the dollar value of a country's final income in a year, divided by its population and reflects average income of citizens.

At the same time, the country's population continues to grow, rising from 13 million 2008 to 17.5 million in 2018, representing a 35 percent increase, according to 2018 Population and Housing Census (PHC) preliminary results.

This, according to IMF, could hinder efforts of improving the well-being of the people and aggravate poverty because it means more mouths to feed and over-stretched resources.

Malawi

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