The International Monetary Fund (IMF) says is not too surprised with current public debt now at K2.9 trillion.

 IMF says given primary fiscal balance deficit performance in the 2017/18 financial year, fiscal authorities should tread carefully on the recent trend of a shift of debt composition toward domestic debt.

IMF resident representative Jack Ree observed that the trend is not good because domestic debt is far more expensive than the external debt.

He said: “As highlighted lately, 2017/18 was a difficult year in terms of fiscal management. The budget implementation suffered both spending overrun, including one caused by Admarc bailout, and revenue shortfall.

The recent trend of a shift of debt composition toward domestic debt is however, not good because in the past, domestic debt was also a driver of runaway inflation and instability of kwacha.

“However, there is no other way when a country wants to reduce indebtedness. We will need to bite the bullet and consistently implement the fiscal adjustment embedded in the Extended Credit Facility programme. Then we will see a gradual, but significant reduction of debt ratio in the years to come.”

According to a recently published Reserve Bank of Malawi (RBM) Financial and Economic Review for the first quarter for 2018, total public debt stock during the first quarter of 2018 stood at K2 900.3 billion, representing a 4.1 percent increase from a 2017 fourth quarter position of K2 786.6 billion.

On an annual basis, public debt rose by 18.7 percent from a debt stock of K2 443.1 billion recorded as at end of the first quarter in 2017.

Public external debt accounted for 52.7 percent of the public debt stock, from 53.4 recorded in the previous quarter and 51.5 percent recorded in the corresponding quarter of 2017.

Outstanding domestic debt stock in the first quarter of 2018 stood at K1371.1 billion, representing a 5.7 percent increase from a domestic debt stock of K1 297.6 billion as was recorded by the end of the preceding quarter.