Africa-Press – Malawi. The International Monetary Fund (IMF) has said greater debt transparency builds investor confidence, helps reduce borrowing costs and strengthens debt sustainability, thereby reducing the risk of shocks that can lead to a debt crisis.
The call from the Bretton Woods institution comes at a time Malawi’s public debt is hovering around K16.19 trillion— as of September 2024.
In a blog post, IMF General Counsel and Director of the Legal Department Yan Liu says in addition to issuing more debt, countries are increasingly using complex and opaque forms of financing.
She adds that new debt instruments—such as guaranteed, securitised and collateralised debt contracts linked to public-private partnerships, state-owned enterprises (SOEs) and pension funds—have appeared on the scene.
According to Liu, because of the novelty and complexity of these instruments, more debt now remains hidden from policymakers and the public.
She says oftentimes, the hidden debt comes to light too late, often during the debt restructuring process.
“When revealed, hidden debt can erode confidence in the government, in its data, and its administrative capacity to provide an accurate representation of the country’s finances. This may lead to higher borrowing costs, and, if the size of the hidden debt is substantial, put debt sustainability at risk and potentially trigger a debt crisis.
“Simply put, you can’t manage what you can’t see, and this is why we need light to cut through the fog surrounding the mountain of debt. We need the right laws in both borrower and creditor countries and strong institutions to do the reporting and debt management [that] the laws require. Debt transparency is clearly a public good,” Liu says.
She observes that policymakers should be held accountable for their decisions on public debt.
“This means that the state audit institution should have the authority to conduct audits on public debt and report them,” Liu says.
Simplex Chithyola BandaPresenting the 2025-26 national budget, Finance Minister Simplex Chithyola Banda said through fiscal consolidation and debt restructuring, the government had demonstrated remarkable effort to ensure the country’s public debt becomes sustainable.
He observed that, in principle, the government has reached agreements with all official bilateral creditors and was negotiating with commercial creditors to restructure debt.
Chithyola Banda said once the negotiations were completed, the initiative would ease the pressure on foreign exchange and provide fiscal space necessary for productive investment.
“The most ideal way of dealing with the unsustainable debt is by enhancing the country’s domestic revenue mobilisation to cover government expenditure without recourse to further borrowing, a situation which has not been attained due to the many shocks that this country has experienced, and affected the economic performance negatively.
“To tame the growing debt, government has stepped up its efforts to strengthen debt and cash management. Government has, and will, continue to contract concessional loans, targeting borrowing to fund projects in the priority sectors, particularly leveraging on alternative and innovative financing,” Chithyola Banda said.
He added that the government would ensure that borrowing targets productive areas to maximise the benefits for the economy.
“Some of the key measures to contain public debt include the following: commitment controls to contain arrears and limiting issuance of guarantees,” he said.
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