Public debt rise worries industry

Post was last updated: January 29, 2019

By William Kumwembe:

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has expressed worry over continued growing levels of public debt in the country.

Total public debt stock has been on the rise since 2017 first quarter and reached the highest level during the third quarter of 2018 at K3,098.80 billion.

Of the amount, 49.6 percent was external and the rest was domestic debt stock.

In its 2018 Fourth Quarter Economic Review issued on Friday, MCCCI said the increase in government borrowing from the domestic market is likely to push interest rates upwards.

The chamber said the situation could, crowd out private sector investment due to the increased cost of borrowing, a development that will stagnate private sector investment and growth and that of the economy as a whole—as the private sector is the engine for economic growth.

“With the forthcoming tripartite elections, this rising trend is expected to continue in 2019 with the likelihood of an increase in unplanned government expenditures,” reads the statement in part.

As a share of the Gross Domestic Product (GDP), total public debt stock was estimated at 57.3 percent in 2018.

External and domestic public debts were estimated at 31.2 percent and 26.1 percent of GDP, respectively.

During the year 2018, domestic debt continued to rise and reached K1, 561.0 billion at the end of the third quarter from K1, 499.5 billion registered the previous quarter.

Other commentators recently rated the trends as unsustainable for the Malawi economy.

The International Monitory Fund (IMF) warned that the country is at risk of a debt distress if no swift action is taken to reverse the situation.

IMF Resident Representative, Jack Ree, said in a recent interview that public debt has increased rapidly since the country got debt relief in 2006.

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