Economic think tanks Malawi Economic Justice Network (MEJN) and the Economics Association of Malawi (ECAMA) have described China’s 20 million US dollar debt relief (approximately K35 billion) as insignificant to Malawi’s debt burden.

This follows an announcement by the Chinese ambassador to Malawi Lu Xu on Monday in Lilongwe, where she also disclosed that her government has extended repayment period for some loans to 48 years to help ease the country’s financial burden.

The news has attracted mixed reactions from economic experts. While others think China's partial debt write-off will offer Malawi a temporary sigh of relief, others have reservations on the impact the said amount will bring in Malawi’s efforts in clearing her debt burden which now hovers around K17 trillion.

The Malawi Economic Justice Network (MEJN) coordinator Mike Mervin Banda says although the USD 20 million may be a small fraction of the total debt that Malawi owes China, people should cherish the motive behind the development. Banda believes China’s decision will inspire confidence in the country’s donors, investors and lenders to transact with the government.

“As MEJN we have been engaging the government, bilateral and multilateral lenders advocating for debt cancellation and restructuring to help turn the country’s economic fortunes. We know the results will be trickling in in a gradual way, but we believe China’s move is a result of such efforts, hence calling on the government to Ministries, Departments and Agencies (MDAs) to ensure financial prudence and fiscal discipline to sustain the gains,” said Banda.

He said at the time of the interview, the network’s officials were locked up in a workshop with budget and finance members from parliament who were being drilled on how to help legislators better understand and scrutinize financial bills before passing them into law so that the country does not burden citizens with unnecessary debts.   

In a separate interview president of the Economics Association Malawi (ECAMA) Dr Bertha Bangara Chikadza also hailed China for the debt relief but said it was a drop in the ocean. Dr Bangara Chikadza said by the end of 2023 Malawi owed China slightly over USD200 million, an amount which has accumulated to over USD300 million after Malawi continued to borrow some money between 2024 and 2025 financial years.

“This is a good development that needs to be emulated by multilateral and commercial creditors. USD 20 million may seem little compared to over USD 300 million total debt which Malawi owes the country, but it is a step in the right direction,” said Bangara Chikadza.

In addition to China, Malawi owes a substantial amount to multilateral creditors like the World Bank and the African Development Bank as well as the commercial banks such as the African Export- Import Bank (Afreximbank) and the Trade and Development Bank (TDB). Malawi also has other bilateral creditors including India and Saudi Arabia.

As of September 2024, Malawi’s total public debt was K16.19 trillion (approximately 86.4 percent of its GDP) which comprises K7.4 trillion in external debt and K8.79 trillion in domestic debt. The domestic debt includes treasury notes and bills, while the external portion is mostly owed to multilateral lenders.

Meanwhile the country is working on restructuring its debt, which includes prospective relief of USD 987 million from 2023-2027.

The country’s debt burden is influenced by factors like a trade deficit and a budget deficit. The weak state of the economy is exacerbated by high inflation and a lack of sufficient foreign exchange reserves.