The Centre for Social Concern (CfSC) says recalibrating the approach to domestic debt in favour of private sector development is key to the country’s socio-economic development.

In an analysis titled ‘Unlocking economic growth: Rethinking Malawi’s domestic debt strategy’, CfSC economic governance officer Kondwani Hara observed that Malawi needs not to just manage its debt, but to leverage it as a powerful tool for the nation’s collective growth.

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He said: “One of the fundamental steps towards a more inclusive domestic debt strategy is the diversification of debt instruments.

“The government should explore issuing a variety of financial instruments such as bonds and Treasury bills, tailored to accommodate the needs and risk profiles of different private investor.”

Hara said creating accessible platforms for private entities to engage in the domestic debt market is paramount, adding that simplifying processes and fostering collaboration with financial institutions can enhance participation, allowing businesses of all sizes to reap the benefits of investment opportunities.

Hara also urged government to seek opportunities for public-private partnerships, ensuring that major projects become joint endeavours to take advantage of private sector expertise and spread the responsibility for economic development.

Ministry of Finance and Economic Affairs developed the Medium-Term Debt Management Strategy 2022-26, to help contain the country’s rising debt burden and ensure that the government meets its debt obligations on time.

The strategy plans to achieve the optimal debt portfolio, grounded in a ranking of the cost and risk trade-offs of alternative debt management strategies.

However, the current composition of the country’s public debt, currently at K13 trillion, about 84.8 percent of the gross domestic product, is prone to a number of risk factors.

However, in its 2023/24 Draft Financial Statement, Treasury said the redemption profile showed that K1.18 trillion, representing 18.3 percent of public debt which is equivalent to 10.3 percent of gross domestic product, is maturing in the 2022/23 financial year.

Reads the report: “With such magnitudes of debt maturing in one financial year, Malawi’s refinancing and interest rate risks are relatively high.

“Beyond the 2022/23 financial year, the redemption profile also indicates maturity spikes on domestic debt, manifesting high debt service payments in the years up to 2027.”

The ministry said the amounts will grow with the expected additional issuance of relatively short and medium-term securities.

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