The government is committed to improving the management of its debt. There is a Debt and Aid Management Division in the Ministry of Finance and External and Domestic Debt Sections in the Reserve Bank that work together to manage the country s debt. Currently, professionals at the two institutions are in the process of developing a comprehensive framework for a debt strategy. It would only be fair to begin by clarifying a few concepts of debt and the status of debt in Malawi. Foreign borrowing allows a country to invest and consume beyond the limits of current domestic production, and in effect, finance capital formation not only by mobilizing domestic savings but also by tapping savings from capital surplus countries.
Foreign borrowing can, no doubt, lead to more rapid growth.
However, inappropriate and excessive foreign borrowing will generate debt service obligations that will constrain future economic policy and eventual growth. As to whether Malawi has experienced debt problems that warrant to be classified as a debt crisis is a matter of perception. A debt crisis occurs when a country is unable to meet its scheduled debt service obligations. Malawi however, has been able to service all its debt without accumulating serious arrears, mainly due to structural portfolio of Malawi s debt. What should be noted however, is the fact that because we prioritized debt service and did not accumulate any significant arrears, the social sectors such as health and education suffered.