Malawi paper says debt relief may not be an end in itself

Malawi’s leading daily newspaper  has used its editorial opinion column to point  comment on President Lazarus Chakwera’s begging bowl speech on debt relief at the 75th United Nations General Assembly (Unga) on Thursday, stating that debt relief may not be an end in itself.

Chakwera asked rich countries and international lenders to immediately cancel debts of poor countries, including Malawi, whose economies have been ravaged by the global coronavirus pandemic.

In its editorial comment, The Nation newspaper  said Chakwera’s appeal  “make more sense.”

But the paper pointed out that, assuming the rich countries and multilateral institutions, which are also reeling from the effects of Covid-19, forgive the debts, what are the chances that the countries won’t gallop back to the current unsustainable levels.

“Malawi has been here before,” the paper noted, saying in 2006, the global financial players cancelled around 90 percent or $2.6 billion of Malawi’s $3 billion foreign debt under the Highly Indebted Poor Countries (Hipc) initiative.

“But the addiction to debts without a clear debt management strategy and embarrassingly weak public finance management systems has taken us back to a debt carrying capacity of nearly zero.”

By June this year, Malawi’s debt stock stood at K4.1 trillion, an increase from K3.4 trillion in December 2019. The current debt stock represents 59 percent of the country’s total wealth as measured by nominal gross domestic product (GDP) which is estimated at $7 billion (about K5.2 trillion). From the debt stock, 57.3 percent represents domestic borrowing and is equivalent to 33 percent of GDP.

The daily states that the maiden Tonse Alliance budget being debated in Parliament currently, has created one of the country’s largest deficits that will largely  be financed by borrowing.

“The bottom-line is this: Unless we put our fiscal house in order, the debt vicious cycle will continue to strangle Malawi with or without  a global pandemic,” concluded the paper.

In his speech, President Chakwera  said with regard to the high risk of debt default, least developed countries (LDCs) such as Malawi acknowledge the World Bank Group, the International Monetary Fund [IMF], the Organisation for Economic Cooperation and Development [OECD] and many key development partners for the debt moratorium granted to LDCs.

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