Gvt loosens austerity measures, as debt balloons to K7.3 trillion

The Minister of Finance explained that the government's public debt had increased from K6.8 trillion to K7.3 trillion by September 2022.

Malawi: Malawi's government presented proposals in Parliament on Friday to redraw fiscal rules on austerity measures.

After four months of austerity rules, including a ban on conferences held outside of ministries and departments in order to reduce spending, Finance Minister Sosten Gwengwe announced that the ban would be lifted.

The minister has increased the approved K2.84 trillion to K2.85 trillion in the 2022/23 National Budget.

Gwengwe stated in Parliament when presenting the ministerial statement that the adjustment is due to higher interest payments on public debt as well as a general increase in compensation for public servants.

He explained that the government's public debt had increased from K6.8 trillion to K7.3 trillion by September 2022.

The new rules and budget adjustments appear to have been inspired by the International Monetary Fund (IMF), which disbursed USD88.3 million through the country's central bank in less than 24 hours.

Gwengwe, on the other hand, claimed that Malawi has been mired in debt since debt relief in 2006, partly because authorities used to borrow heavily on the foreign front in order to use the money from the loans to keep the exchange rate stable.

To emphasise his claims, the minister stated that the government intends to increase exports, food production, and cash crops this year by involving the Malawi Defence Force, Greenbelt Authority, and Malawi Prison Services in the establishment of Mega farms.

In an interview with AfricaBrief, economic expert Chindikani Sichinga warned Gwengwe against lifting the ban and increasing the budget.

Sichinga claims that Tonse Alliance is in charge of a budget riddled with fraud and corruption.

"The budget remains consumptive, and the government appears to be overwhelmed by IFM assistance. Malawi must reduce borrowing in order to maintain its financial health, "Sichinga was cautious.

The minister also stated that the budget deficit is expected to rise from around K800 billion proposed in February to around K900 billion.