Foreign debt maturity depleted forex reserves –RBM
Authorities are admitting that service delivery by the government are being affected since the maturity of debt in 2020 which depleted foreign exchange reserves.
The Reserve Bank of Malawi (RBM) said in a statement that between 2012 and 2020, total debt amounted to approximately $1.2 billion of which $800 million was contracted from Afreximbank.
Since the maturity of this debt, according to RBM, forex has been depleted leaving Lilongwe desperate to renegotiate with creditors for flexible terms of payment.
“Of this amount, USD350 million was contracted by the Reserve Bank of Malawi on behalf the Malawi Government while USD450 million was contracted by Reserve Bank of Malawi for its own books.
“These borrowings, coupled with other debt contracted by the Malawi Government bilaterally, have rendered Malawi’s external debt unsustainable, as classified by the World Bank and International Monetary Fund’s framework for debt sustainability analysis,” reads the RBM statement.
To date, several negotiations have been held with creditors according to the statement and the financiers have shown willingness to assist the country to reach debt sustainability.
Meanwhile, opposition Democratic Progressive Party (DPP) said it did not leave an K800 million credit facility with Afreximbank in 2020 when it was in power.
In a statement signed by spokesperson Shadreck Namalomba, the party said Afreximbank invested in treasury notes to the tune equivalent to $350 million which was transferred to RBM –awaiting its maturity.
It said the local bank where the investor (Afreximbank) bought the kwacha offloaded the dollars to RBM in line with prudential guidelines not as a loan but as a mere market purchase just like any purchase of dollars the RBM makes on regular basis as a buyer of last resort.
Read the statement: “The payment to Afreximbank following the maturities of the Treasury Notes/Bonds is therefore normal and the Bank is expected to anticipate this in line with the maturity profile of the Treasury Note/Bonds and plan accordingly.
“So instead of preserving the US$350 million on the balance sheet of the Bank to ensure that it is available when liquidating the facility when the Treasury Notes mature, the US$350 million was used for other things and therefore was not available to service the facility.
“Further to the US$350 million Treasury Note transaction the DPP left with Afreximbank when leaving Government, the DPP understands that in July of 2020, Tonse led Administration completed another US$100 million Treasury Note transaction with Afreximbank bringing the total Treasury Notes with Afreximbank to US$450 million.”
Meanwhile, former governor Dalitso Kabambe has attributed the current economic challenges to bad economic policies that have resulted in bloated wage bill, soaring inflation and weakening exchange rate.