Malawi seeks fuel reserves funds

Minister of Finance Ken Lipenga on Monday tabled in Parliament a Loan Authorisation Bill through which government is seeking approval to borrow about K24 billion ($76.5 million) for construction of 60 million-litre capacity fuel storage reserves.

Lipenga told Parliament that part of the money, being borrowed from the Export-Import Bank of India, would be used for development of several irrigation projects in Karonga, Salima and Mangochi as part of the Green Belt Initiative as well as construction of a sugar processing plant in Salima.

He said the loan will be for procurement of capital equipment for the three projects.

Lipenga said the fuel storage reserves, to be located in Mzuzu, Lilongwe and Blantyre, will have a total holding capacity of 60 million litres for both petrol and diesel which he said would be enough to cover the country for about 60 days.

Said the minister: “To secure sustainable supply of fuel, government established the National Oil Company of Malawi [Nocma], but Nocma has not been able to meet this mandate due to shortage of forex as well as adequate storage facilities.”

The strategic fuel reserves were initially planned for completion by January this year, according to a statement from the Ministry of Energy and Mining published in July 2011. The project was awaiting feasibility study, according to the ministry. At the time, the project was estimated to cost about $25 million.

In his contribution to the bill, Malawi Congress Party (MCP) spokesperson on financial matters Joseph Njobvuyalema advised government to rehabilitate existing reserves at Chilumba in Karonga, Chipoka in Salima and in Mchinji instead of embarking on new facilities to save money.

He also cautioned government on borrowing levels.

But Minister of Energy and Mining Cassim Chilumpha, who also stood to contribute to the debate, backed the proposed construction of the new facilities, saying currently, the country has fuel reserves with a combined capacity of two million litres which he said is not adequate as the fuel can only last two days.

Chilumpha also said existing reserves in Chilumba, Chipoka and Mchinji are far from main business centres where more fuel is required.

Kasungu Central MP Ken Kandodo also observed that although a lot of people are expressing concern about the level of borrowing, the borrowing itself is not bad, but that what matters is the purpose of the borrowing.

Lipenga said the loan is expected to be paid back in 20 years with a grace period of five years at a rate of 1.75 percent interest per annum.