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Malawi: After Debt Relief


The Paris Club or creditors last week cancelled almost all of Malawi’s foreign debt, following on the heel of the IMF and the World Bank which cancelled 90 percent of the country’s loans six weeks earlier. The two transactions mean Malawi’s total foreign debt of an estimated three billion dollars has been reduced to just about 400 million dollars. But what would Malawi do with the extra money from the debt relief? Finance Minister Goodall Gondwe has said the government would incorporate any surplus resources in a supplementary budget. But that doesn’t seem to be satisfactory to critics like Rafiq Hajat, executive director of the Institute for Policy Interaction in Malawi. He tells VOA English to Africa reporter James Butty what Malawi should do with its debt relief funds.

“I have a problem with the monitoring and evaluation of whether our government will truly use the funds that were saved from debt cancellation, and whether the recipients will really be the grassroots who have suffered for so long under the heel of branding poverty. It would have been my idea to include elements that also address the area of good governance. And a vital element of that is the strengthening of civil society to perform its vital role as the fourth estate,” Hajat said.

He also says part of the funds from debt cancellation could go toward reducing Malawi’s domestic debt which he says is between 60 and 70 billion Malawian Kwacha. But Hajat says the local banks should contribute in defraying the local debt.

“I don’t feel that is correct to use the debt cancellation from our foreign partners to alleviate or ameliorate the local debt. That’s like taking salvation and pouring it into a black hole. I believe that the way to do this firstly is by responsible expenditure by the government and also by renegotiation with our local partners. The local banks should take a lead out of the book of the Bretton Woods organizations. Surely the local banks could wave the interest if not the principal,” Hajat said.

Hajat also says the money from Malawi’s debt cancellation could be used to fund Malawi’s tertiary education.

“One of the recent developments here that has caused grave concern is the intention to raise tertiary education fees by 400 percent. You must remember that the per capital income in Malawi is 160 dollars per year, and a dollar equates to 135 kwacha, and if you do your math you’ll realize that this puts the prospect of tertiary education out of the reach of about 80 percent of the Malawian populace. So I would strongly advocate that part of this debt relief must be channeled toward keeping tertiary education affordable perhaps by implementing some kind of student scheme because the future of any nation depends on the level of the education of the future generation,” Hajat said.

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