Centre for Social Concern (CfSC) has challenged government to improve on low absorption capacity of projects implemented with loans.
CfSC director James Ngahy said the Malawi Indebtedness study highlights concerns on the rapid build-up of public debt with little results on the ground are some resources as spent on consumption while those for development do not produce desired results.
Reads the report in part: “Such borrowing may have been a result of the need for more investment in development projects and consequently higher growth in the economy and improved livelihoods of the citizenry.
“However, other macroeconomic indicators point to stagnation in the economy, no significant improvement in the productive sectors.
“The delays in project implementation from loans imply very low absorption capacity of the available loans. Considering there is a commitment cost to undisbursed amount, such loans are a cause of concern as government must use the scarce resources to pay commitment charges.”
For instance, the centre points that between 2010 and 2017, government signed several loans but projects have either not taken off or have delayed due to various reasons including low absorption rate.
Ministry of Finance, Economic Planning and Development spokesperson Davis Sado agreed in an interview that concerns from the CfSC study are genuine.
He said the ministry is working to address the issue to ensure value for money from the loans.
Saddo said: “Efficiency in the management of projects both locally and donor financed remains a concern because the issues as raised in the report of low absorption, long procurement processes have ended up affecting the implementation of projects.
“As a result they have an effect as we end up incurring cost overruns. On top of that, if projects take long they affect completion period as such it requires additional resources.”
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe in an interview yesterday yesterday said project implementation is an area that require significant improvements if the country is to realise gains from loans obtained for various development projects.
He said: “Project management is very critical because the losses that you incur by delayed project implementation are tremendous. So, yes, the report speaks on what is happening and it is costing the country big time”.
The International Monetary Fund (IMF) has recently said the country may increase its gross domestic product if reforms in project implementation to increasethe rate of absorption are undertaken. Recently, authorities in the transport sector were taken to task for failure to carry out improvements of the runways at Chileka and Kamuzu international airports despite signing several loans for the same