(Bloomberg) -- Malawi is in talks with international lenders to restructure as much as $1 billion of debt as the nation seeks an economic program from the International Monetary Fund.
The government started talks with lenders including the African Export-Import Bank and the Eastern and Southern African Trade and Development Bank to reorganize its loans, Finance Minister Sosten Gwengwe said March 15. Malawi owes $757 million to Afreximbank and $145 million to TDB, along with $209 million of arrears, as of December 2020, according to the IMF.
“So far, the response has been positive,” Gwengwe said of talks with Afreximbank and TDB. He didn't detail how much the government was seeking to restructure with the two lenders, only saying that Malawi's total public debt was $5.8 billion. External public debt was $3.6 billion in June 2021, according to the Finance Ministry's Annual Debt Report published in November.
The central African nation that relies on tobacco for about half of its export earnings will probably need to revamp at least some of its borrowings in order to qualify for a bailout package from the IMF. The Washington-based lender considers Malawi at high risk of debt distress, according to a statement in December. The fund doesn't usually lend to countries with unsustainable loans until they take steps to restructure them.
Common Framework
While the Malawi government has yet to make a final decision, it probably won't use the Group of 20's so-called Common Framework that the most powerful countries drafted to help poorer nations restructure debts that soared during the coronavirus pandemic. That's because about 80% of public debt in one of the world's poorest nations is concessional and largely from lenders like the World Bank and African Development Bank, which aren't participating in the framework, Gwengwe said.
“This means that we may not benefit substantially from the framework,” he said. “This is not to say that we are not having problems with our commercial debt, just that we are pursuing the restructuring process directly with the creditors.”
Afreximbank and TDB didn't respond to questions seeking comment.
Malawi's public debt grew to 55% of gross domestic product in 2020, and was forecast to rise to 63% this year, according to the IMF's debt sustainability analysis published in December.
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