BY CHIMWEMWE MANGAZI:
Some economic commentators have reservations over President Peter Mutharika’s idea to borrow from Brics’ New Development Bank established in South Africa, stressing that public debt levels are already high in relation to the country’s Gross Domestic Product (GDP).
On arrival from the Brics summit on Sunday, Mutharika told journalists that he has instructed Minister of Foreign Affairs and International Cooperation Emmanuel Fabiano to file a loan application for Malawi to benefit from the $34 billion set aside by the bank for infrastructure and energy sector development.
Mutharika backed the establishment of the bank, saying institutions such as the World Bank and International Monetary Fund are dominated by western countries.
“They have set up this new bank worth $50 billion and I am hoping that we can take advantage of that bank [to promote] infrastructure and power sectors in Malawi. So, we will do our best to access that,” Mutharika said.
But Economics Association of Malawi President, Chikumbutso Kalilombe, said it is not viable for Malawi to be exploring borrowing opportunities as it may cause macroeconomic imbalances.
“Currently, public debt levels are above the limit of debt to GDP ratio of 50 percent. This means that we, as a country, have reached unsustainable levels. This outturn also implies that we, as a country, may have problems in serving our debt since debt is, on average, growing faster than the country’s GDP. This has potential to cause macroeconomic imbalances,” Kalilombe said.
Economics Research and Evaluation Consultant, Colen Kaluwa, concurred with Kalilombe, saying most infrastructure development projects have been used in the past to swindle money from public coffers.
“When he says infrastructure development, that becomes tricky because its where people start siphoning money through bogus contractors. Borrowing is not bad per se but, right now, Malawi is heavily indebted both outside and locally. As such, adding more debt to a more fragile economy will be detrimental,” Kalua said.