Malawi Government misreported to the International Monetary Fund (IMF) details of the payment of debt arrears in billions of kwacha to South African arms supplier Paramount Group—breaching performance criterion of Extended Credit Facility (ECF), which has since gone off-track, Nation on Sunday can reveal.
But Minister of Finance Goodall Gondwe has pushed the blame on misreporting to the People’s Party (PP)-led government of Joyce Banda, which initiated the $145 million(about K78 billion at current rate) arms deal with Paramount, arguing that the Peter Mutharika administration was forced to renegotiate the deal to pay only K15 billion.
According to official communication from IMF to the minister dated February 12 2015, copied to Reserve Bank of Malawi (RBM) Governor Charles Chuka, government’s information provided to IMF did not indicate existence of such a debt and arrears as was required in the performance criterion specified in the memorandum of understanding.
The communication from IMF managing director Christine Lagarde to Gondwe on the misreporting, seeking “corrective actions” in strengthening debt management, prompted Gondwe to pledge that the anomaly would be rectified.
The communication said the information IMF had received on external payment arrears did not reveal existence of such arrears, including when an IMF staff team that visited Malawi until July 2014 on the agreement signed in December 2012 under a Supply Credit Agreement.
According to the communication, when the officials visited the country, “the documents received by the staff reveal that the government contracted a non-concessional supplier credit in amount of approximately $145.3 million repayable in equal quarterly instalments over a period of seven years and 10 months”.
But Gondwe on Thursday while confirming receiving the communication, blamed the Banda administration for the anomaly.
“This [Peter Mutharika] government decided to send the information to IMF as they wanted and secondly, we have re-negotiated the deal with Paramount Group. We sent the details of the re-negotiated deal to IMF and they have approved it.
“The reason we are offtrack is that we were given four conditionalities, all of them have been done, except government borrowing. Paramount Group is just one of the companies we owed. We have been paying Paramount Group arrears and IMF is satisfied,” said Gondwe.
RBM spokesperson Mbane Ngwira said while the bank was central to the government monetary policy, the matter of the alleged misreporting was a sole responsibility of Treasury as it had to do with government debt management.
The DPP-led government initially cancelled the multi-billion kwacha deal with Paramount, which was entered by the Banda regime, but it later decided to pay the company for orders of military equipment already delivered.