Finance Minister Felix Mlusu
* To cushion effects caused by COVID-19 pandemic period
* Payment is being made after thorough verification by the Auditor General’s office
By Duncan Mlanjira
In his presentation of the review of the second half of the 2020/2021 Budget in Parliament on Friday in Lilongwe, Finance Minister Felix Mlusu said in order to support the business community during the COVID-19 pandemic period, Government has commenced payment of public sector arrears as one way of injecting the much needed liquidity into the economy.
Under this program, Mlusu said, Small and Medium Enterprises will be prioritised in which cash payments will be made on smaller amounts while promissory notes will be issued for large amounts.
He added that payment is being made after thorough verification of the arrears by the Auditor General’s office.
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On the financial inclusion and entrepreneurship scaling project, Mlusu said the august House authorised Government to borrow from the World Bank, funds amounting to US$86.0 million, or K63.6 billion for the project.
“The project is now effective and the World Bank disbursed USD15.0 million,” he announced. “Government through the Reserve Bank of Malawi is working with local banks on modalities through which SMEs will access financing. Disbursement will commence mid-March 2021.
“Apart from contributing towards job and wealth creation, Honourable Members may wish to note that the project’s activities are structured in such a way that they aim at enhancing supply of financing liquidity and scaling up entrepreneurship skills in Malawi.
“Furthermore, Madam Speaker, this Project will assist Government in cushioning the private sector, especially in the SME sector, against the adverse effects of COVID-19 pandemic.
Creation of a Debt Retirement Fund
During his Budget Statement presented last year, Mlusu said one of the major concern in economic management of this country is the high and rising public debt stock.
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“In order to start repaying this huge debt and reduce it to sustainable levels, Government is at an advanced stage in establishing the Debt Retirement Fund (DRF).
“The Ministry of Finance has completed the identification and quantification of the possible sources of finance into the Fund. Implementation of this Fund is expected to be approved by Cabinet in time for its operationalisation on 1st July 2021.”
He also said Government made a commitment to empower informal sector entrepreneurs through cooperatives and associations to upgrade their skills and enable them produce quality products for the local and export market.
“In this regard, in December 2020 Government — under the Public Procurement and Disposal of Public Assets Act — enacted regulations to empower SMEs to participate in public procurement of goods, works, and services.
“However, Madam Speaker, these SMEs are required to register their businesses with the Registrar of Companies and the Malawi Revenue Authority for tax purposes.
Malawi Sovereign Credit Rating
He said a decision was made for Government to obtain a credit rating for Malawi as one way to facilitate the country’s access to international finance and it will proceed to obtain a private point-in-time rating which will set the ground for a public sovereign credit rating.
The process is, however, being delayed by COVID-19 travel restrictions.
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On long term development bond, Mlusu announced that the Government has progressed with preparations to issue a 15-year development bond for some strategic and flagship projects.
“My Ministry in conjunction with the Ministry of Economic Planning and Development completed the selection of prioritized flagship projects that will be financed through the issuance of this long term bond.
“Other financing models for these projects include Public-Private Partnerships, Foreign Direct Investment or local direct financing where Government will expect to receive a turnkey solution from a project promoter.
“Ministry of Finance will soon release a prospectus on all prioritized flagship projects, inviting the participation of the private sector in the national development agenda through infrastructure financing and development.
Houses for Security Institutions
Through Ministry of Lands, the Government has commenced the construction of the promised 10,000 houses for security institutions whose financing of K4.6 billion was released in the management of the first half of the 2020/2021 fiscal year.
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“Currently 231 houses are under construction in different sites across the country. Honourable Members are invited to note that site selection as well as number of house allocation per site were decided upon after thorough consultations with the respective security institutions.
“Financing for this project is through a long term development bond that was issued by Government and raised the initial required amount of K21.0 billion.
“Just like many other Government projects this year, construction of security houses has many other positive spill over effects including job creation for the youth and economic empowerment for Malawian entrepreneurs in the construction sector as well as all other sectors with strong forward and backward economic links to this sector.”
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Mlusu also disclosed that the Government is working on a policy on free electricity and water connections that was promised by the Tonse Alliance Government and I mplementation is expected to commence during the 2021/2022 fiscal year.
Rebranding Malawi Enterprise Development Fund (MEDF)
He said MEDF was rebranded into the National Economic Empower Fund (NEEF) Limited in September, 2020 whose main objective was to enhance its operational efficiency to economically empower Malawians through job creation; enhance entrepreneurial activities; and support agricultural productivity and value addition.
Rebranded to NEEF
“I am pleased to inform the august House that NEEF is now operational, notwithstanding the prevailing COVID-19 pandemic. NEEF is disbursing loans in accordance with its new policies and procedures.
“Total loan portfolio still stands at K40 billion and is expected to increase to K75 billion during the 2021/2022 financial year. The first phase involves disbursement of loans to groups of micro entrepreneurs.
“As of the third week of February this year, 907 groups were mobilised comprising 634 women groups, 238 youth groups, and 35 mixed groups.
“Disbursement of loans in 2021 has a target of not less than 20,000 Malawians and as at 19th February 2021, NEEF had disbursed just over K1.0 billion to about 590 loan groups across the country.
“Phase two of loan disbursement will focus on individual small and medium enterprises and access is scheduled to roll out in early March 2021.”
