By Mabuchi Chunga
Malawi has been advised to invest the money it borrows from lending institutions rather than borrowing for consumption.
Catholic University based economist, Gilbert Kachamba said it is much wiser for a country to borrow to invest because from any investment there is a Return On Investment (ROI) that could subsequently be used to pay back the loans.
“What we need to do is to borrow for investment and not consumption because we are looking at the returns of what we have done with the money; if we have borrowed for investment we expect returns which may lessen the burden of repayment,” he said.
Kachamba outlined the implications connected with borrowing for consumption citing this hinders the economic growth of a country since it is depleting future funds.
He further said that in such type of situations means that if you have money in the future the money is mostly used to pay back the debts acquired thus choking economic and developmental growth.
“If you have debt at some point you have to repay which means you have to take some portion of the income and pay the instead of using the income to develop yourself in the future. When you have a lot of debt it is hard to develop,” he said.
Kachamba was commenting on the latest World Bank Africa Pulse review document that has put Malawi among countries which have reduced their loan repayment years and this in turn has opened a possibility to borrow again.