Interest payment account for a quarter of the proposed 2023-2024 budget

A huge price of the country’s public debt accumulation is being paid in the forthcoming budget, which sees a quarter of the K3.9 trillion fiscal plan being interest payment.

The budget has a hefty allocation of K914 billion towards interest payment to maturing debts.

This is K270 billion more than the last year’s allocation and about 24% of the total budget which is huge and devastating, as it calls for extra borrowing.

Finance Minister Sosten Gwengwe attributes this to last year’s devaluation and the huge maturities of the past debts.

“Interest on public debt has been estimated at K914.86 billion, representing 6.0 percent of GDP which is an increase of K269.66 billion, from K645.20 billion for 2022/2023 financial year’s revised provision.

“This increase is partly on account of the impact of devaluation of the Malawi Kwacha against the major foreign currencies and huge maturities of promissory notes used to clear arrears,” Gwengwe said.

The finance minister added that K35.87 billion of the total resources earmarked for interest payments is meant for foreign interest payment, while K878.99 billion will cover domestic interest payment.

Meanwhile, an economic analyst from Malawi University of Business and Applied Sciences MUBAS Betchani Tchereni expressed worry that the ‘unavoidable situation’ deprives other projects of funding.

He has however underscored that government, being a hereditary government burden, Capital Hill has to settle these maturing debts despite the fact that they were incurred decades ago.

“It has suffered quiet tremendously because a lot of borrowing will actually be undertaken in order to service other debt and that is an issue to be concerned about,” Tchereni said.

As at December 2022, total public debt reached 7.9 trillion kwacha or 69.9% of GDP of which 4.43 trillion kwacha is domestic debt while 3.47 trillion is external debt.

This is a 23.8% increase compared to end-March 2022 when it stood at 6.38 trillion kwacha.