Sovereign Debt Situation in Malawi: The Role of the Legal Profession in Public Debt and Finance Management and Lessons From Across the African Continent
Honourable Attorney General, Mr Thabo Chakaka-Nyirenda
The Malawi Law Society (MLS) in collaboration with the Reserve Bank of Malawi (RBM) and the Malawi Institute of Legal Education (MILE) delivered a one-day conference under the theme Sovereign Debt Situation in Malawi: The Role of the Legal Profession in Public Debt and Finance Management and Lessons from Across the African Continent. As part of the Society’s Continuous Professional Development programme for lawyers particularly those in the financial services sector, the Society, RBM and MILE jointly host this kind of conference annually to discuss and share knowledge on topical issues. The conference took place on 25th August, 2023 at Nkopola Lodge in Mangochi.
The purpose of of the conference was broadly twofold. Firstly, to identify what role the legal profession has to play within the broader economic architecture of the country in order to facilitate the effective and sustainable public debt management for the development of the country. Secondly, to equip lawyers with basic knowledge of the key concepts and fundamentals in public debt management and excite interest for the profession to contribute to sustainable public debt management. The conference took the format of presentations and a panel discussion. The panel discussion was beamed live on Times TV and Times 360 Facebook page.
In his opening remarks, the President of the Malawi Law Society, Mr. Patrick Gray Mpaka, emphasised that the legal profession has a paramount role to play in the public debt crisis in Malawi. He said that “the Constitution of the Republic of Malawi promotes openness, accountability and transparency and if as a country we would take the constitutional principles as our instrument of development, we would not find ourselves in the present debt situation”.
The Guest of Honour at the conference was Honourable the Attorney General of the Republic of Malawi, Mr. Thabo Chakaka-Nyirenda. In his speech, he observed that poor management of public procurement leads into debt stress. He further observed that current Malawi public debt situation has been influenced by a number of factors including failure to adhere to the law in debt management. He acknowledged that legal practitioners indeed have a role in debt management. “Lawyers should be accountable in a crisis like the debt situation in Malawi because lawyers draft and vet agreements that are used in the borrowing process.” Said the AG. He further emphasised that the constitutional principles of Openness, Accountability and Transparency depend on good governance and upholding of the rule of law. He therefore, called for practical solutions in the conference in order for Malawi to achieve economic justice for development and manage its public debt.
The Presentations
Four presenters made very illuminating presentations. The first presenter was Dr Austin Chiumia, a Principal Economist at RBM and an Accredited Fellow and Resource Person in Monetary Policy Management and Macroeconomic Modelling. In his presentation titled “Sovereign Debt Developments in Malawi”, Dr Chiumia observed that debt trends have been hitting up globally when he compared the debt developments in Malawi to the regional and global developments. He also stated that the debt drivers are the same all over and these are imports being higher than exports, revenue being less than expenditure, low saving rates, low tax GDP, High Global Interests rates and legacy debt issues compounding current debt levels. The presentation observed that the debt situation can be properly managed if a holistic approach is taken in dealing with it namely; making all players in the ecosystem accountable and transparent especially the executive arm of government. It was said that if the country can focus on production that should earn forex the debt situation can get better.
Mr Stan Nkhata who is currently working as an Advisor on Debt Management at the Commonwealth Secretariat in London, the United Kingdom presented on “Sovereign Debt Restructuring and Global Initiatives”. The presentation acknowledged the worsening global public debt situation which has recently been influenced by Covid-19 pandemic. The presentation noted that the international community has introduced debt restricting initiatives in response to debt service challenge and these include the G20 Common Framework and the Paris Club Creditors. The presentation further noted that debt restructuring, though it gives relief, does not reduce the debt but postpones it. The presentation proposed the following solutions for managing the debt crisis in Malawi: (a) there is need for inclusion of the domestic debt in the debt restructuring process; (b) public management reforms should accompany debt restructuring for debt restructuring to be meaningful; and (c) the country needs to implement sound economic reforms for successful negotiations with creditors.
The third presentation was from Mr Kamudoni Nyasulu, a lawyer with 42 years’ experience and the Managing Consultant of Kamudoni Nyasulu Law Consultants. The presentation titled “Debt Crisis in Malawi: The Role of the Legal Profession in Public Debt and Finance Management” directly tackled the role of the legal profession in public debt and public finance management. The presentation identified the actions that have impacted on public debt and public finance management in the country as follows: unapproved expenditure and/ or borrowings, budget deficit, lack of standalone law on public debt, mismanagement of resources that leads to poor management of public debt and increased contingent liabilities due to lack of coordination in contract negotiations. The presentation observed that the debt crisis in Malawi can be managed in the following way: active enforcement of the current legal framework including prosecution of public expenditure that lack parliamentary approval, capacity building within the public service delivery, avoiding contingent liabilities, analysing funding against performance of state funded entities and activities by Parliament, coordination of the three arms of government, rule of law functionality over form, Multi-institutional prosecution which should be led by the RBM, amendment of instructions to the treasury under the Public Finance Management Act, taking action on the findings from the audit reports where clear public finance mismanagement is noted and ensuring that the right competencies are employed in the right spaces within the government mechanism.
The presentation centred on the role of the legal profession in managing the public debt crisis in Malawi and in the end it was suggested that the MLS should always assist the Legal Affairs Committee as well as the Budget and Finance Committee of Parliament in their various works in the management of public debt and resources. It was further suggested that all government Ministries, Departments and Agencies that are headed by lawyers should be held accountable on public debt management and the Judiciary should also be engaged in the crisis especially on the aspect of rule of law. The presentation further proposed that the Office of the Attorney General should actively take steps to recover public money through civil remedies and appropriate criminal sanctions and finally that the RBM should take lead in the investigation and prosecution of fraud in public finance.
The final presentation centred on the experiences in litigating public debt. The presentation was passionately presented by Janet Zhou, Executive Director for Zimbabwe Coalition on Debt and Development. The presentation was titled “Litigation Public Debt in Africa: Insights from the Zimbabwe Experience.” The presentation observed that in litigating public debt it is important to evaluate the source of debt and the sustainability of the debt against government’s resources. The presentation also noted that mismanagement of public debt impacts on availability of resources for social programmes and it follows that an active citizenly which pushes for public accountability is key in the process. It was cited as an example that in Zimbabwe everyone has the right to seek information on public expenditure and this has helped in public debt litigation. This right, it was stated, aids proactive litigation to assess the application of public debts incurred by government. The presenter added that Public Interest litigation can potentially lead to negotiations of unfavourable loan terms.
From the presentation, the role of lawyers in public debt management came out clearly. The presenter stated that lawyers should be in the forefront in assisting the public to bring public interest cases and demand accountability through the courts, seeking judicial intervention to assess onerous loan terms and assessing compliance by the government with the law on public debt and application as well as assessing the process and justification for borrowing. On the part of other stakeholders, the presentation proposed that the Judiciary should fast track determination of matters concerning public debt while on the other hand Parliament should be slow in approving borrowing and quick in demanding accountability in expenditure on government resources.
Panel Discussion
The panel discussion was moderated by Dr. Sunduzwayo Madise, Deputy Vice Chancellor of the University of Malawi. The panellists for the discussion were as follows: Honourable Gladys Ganda, a Member of Parliament and the Chairperson of the Budget and Finance Committee of Parliament; Dr. Chikosa Silungwe, former Attorney General and Legal Consultant; Associate Professor Betchani Tchereni, the Executive Dean at the School of Business and Economic Science, Malawi University of Business and Applied Sciences and Mrs Brenda Mwale, the Head of Operations at Old Mutual Malawi Limited.
The panellist addressed a wide range of questions most of which tackled the issues that were raised in the presentations. At the end of the day the panellists agreed that the public debt situation in Malawi is not sustainable and as a country we have to make sure that we identify and implement ways of managing the situation. The panellists agreed that Malawi has a proper legal framework to manage public debt but there is lack of prudence, accountability and transparency in our dealings in public debt transactions. For example, it was observed that there is the lack of coordination between Parliament and the Executive arm of government where borrowing is done without following the right procedure. The situation is worsened by the fact that most of the borrowed funds are not used for the intended purpose and, usually, there is no follow up by Parliament.
The panellists were of the view that the office of the Attorney General needs to be truly independent and not be used for political gains. If the office of the Attorney General was to strictly discharge its constitutional mandate, the office could help in public debt management and safeguarding public interest by among others, ensuring that the right procedure in loan authorisation and management is followed. Finally, the panellists agreed that the legal profession has a key role to play in public debt and public finance management.