In a bid to pacify the standoff between government and members of Parliament (MPs) on the General Purpose Administration (GPA) loans, government has agreed to guarantee the loans at 27 percent interest rate.
Currently, lending rates in commercial banks are pegged at 39 percent, which economic experts have said was among the highest in the world.
In the past two weeks, MPs have been threatening to disrupt the budget debate if government was not going to meet their conditions of service in full, with emphasis on their access to the GPA loans.
In an interview soon after making his concluding remarks on the budget, Minister of Finance, Economic Planning and Development Goodall Gondwe said MPs have agreed to get the loans from their respective commercial banks, but at a lower interest rate.
He said: “They are going to start accessing their loans soon from their respective banks. The MPs have agreed to pay back the loans at 27 percent interest. As government, we are not subsidising the loans.”
Gondwe added that he was not obliged to negotiate interest rates or subsidise MPs’ loans.
He said the thorny issue has been that MPs did not want to access the loans from the commercial banks at the prevailing interest rates and that government did not want to subsidise the same.
Said Gondwe: “They will take the loans at the interest rate as pegged by Reserve Bank of Malawi [RBM]. They are happy with this arrangement.”
Since Parliament resumed sitting after cluster meetings, MPs have been demanding that government implement their conditions of service in full emphasising that government guarantee the General Purpose Administration loan fund which ranges between K1 million ($1 399) to K3 million ($4196).
Chairperson of Social Welfare Committee in Parliament, Alex Major, said it was true that MPs have agreed to the 27 percent government offer, but they only accepted because government is sailing in troubled waters economically.
He said: “People in government are accessing the same loans at 10 percent interest rate, why have they given us 27 percent? It is discriminatory.”
Major said there was a misconception over MPs’ GPA loans, yet loan facilities apply to every government employee not only MPs.
GPA is a 36 months loan amounting to K3 million which all MPs are eligible to apply. Government subsidises its interests.