By Kingsley Jassi:

Standard Bank plc sees a host of risks ahead, amid recovery potential for the local economy, cautioning that materialising of domestic debt restructuring could cripple the local financial sector.

Standard Bank Chief Executive Officer Philip Madinga said this after briefing the bank’s investors of the 2024 performance that saw the bank’s profit growing by 64 percent to K86.4 billion.

Malawi and the IMF are reviewing the Extended Credit Facility (ECF) and the bank says that the outcomes of the negotiations will be crucial to the economy.

Some shareholders asked about the bank’s position on the suggested domestic debt restructuring to ease the debt burden that intensifies as the government anticipates interest cost to reach K2.17 trillion in the next fiscal year which is 8.4 percent of GDP and 49.2 percent of domestic revenues.

With foreign debt interest estimated at just K61.2 billion, interest for domestic debt is estimated at K2.1 trillion, causing suggestions that the government should secure restructuring of domestic debt as efforts are also being made on the foreign debt.

However, Madinga said this would destabilise the financial sector, causing losses that would even affect industries, including the pension industry.

“At this point, we do not expect domestic debt restructuring to happen, even authorities haven’t indicated that position and we hope that remains the case,” Madinga said.

However, Madinga said that this remains one of the major risks in the outlook as it still remains a decision that rests in the realm of authorities.

Other risks the bank highlighted include persistent forex shortages, US government policy reversals and conflicts, saying Malawi’s economic performance is expected to be below the regional average, projecting growth rate at between 2.5 and 2.8 percent.

The bank does not expect a single digit inflation rate soon, and all these risks will continue to dumpen recovery efforts, according to the bank.

Nevertheless, the bank expects to build internal resilience and achieve higher performance levels in the year, targeting to reduce cost to income ratio, increase revenue, return on equity among other performance areas.

Amid economic recovery efforts and policy changes in the industry and trade area, the bank says it will respond positively to support the efforts.

Madinga disclosed the bank’s injection of $100 million in tobacco industry to support production, while more investments are also being made in other agricultural industries, manufacturing and infrastructure development.