Reserve Bank of Malawi Addresses Unsustainable Debt Situation with Afreximbank and Other Creditors

The Reserve Bank of Malawi has issued an official statement concerning the significant foreign currency denominated facilities it entered into with various external creditors between 2012 and 2020. These facilities, amounting to around USD 1.2 billion, were initiated for the Malawian Government and the Reserve Bank, with a substantial portion contracted from Afreximbank.

Of the total borrowed amount, USD 350 million was secured on behalf of the Malawi Government, while USD 450 million was borrowed directly by the Reserve Bank for its operational needs. However, the collective effect of these borrowings, combined with other bilateral debts contracted by the Malawian Government, has pushed the nation’s external debt to an unsustainable level. The World Bank and the International Monetary Fund, using their framework for debt sustainability analysis, have classified Malawi’s external debt situation as unsustainable.

The repayment obligations on these borrowings began after June 2020. However, the resultant debt service payments have had a detrimental impact on the country’s foreign exchange reserves, consequently affecting the Government’s capacity to deliver essential public services.

To address this financial challenge, Malawi has engaged in negotiations with both the Malawi Government’s creditors and the Reserve Bank of Malawi. The negotiations have been characterized by positive interactions, and the creditors have displayed a willingness to work collaboratively with the country in order to achieve debt sustainability. The Malawi Government remains optimistic about reaching mutually acceptable terms through these discussions that will ensure the best outcome for both the Government and its creditors.

As the talks continue, the Government is committed to securing terms that will alleviate the economic burden caused by the debt, fostering financial stability and creating an environment that allows for the effective provision of essential services to the citizens of Malawi. The ongoing negotiations reflect a concerted effort to address the challenges posed by the unsustainable external debt and set a course for a more stable and prosperous financial future for the country.