Funding towards the road sector has increased by K5 billion following implementation of the automated fuel levy adjustment system.
The development is likely to result in increased allocations for the road sector programmes in the coming years.
The fuel levy structure was changed in July last year as the first reform area of the Roads Fund Administration (RFA) in the ongoing Public Service Reforms programme whose commission Vice-President Saulos Chilima chairs.
The fuel levy is computed as a percentage of the pump price and not an absolute figure per litre to guard the RFA against loss as a result of depreciation of the local currency.
The development also comes at a time when the main roads sector has been hit by the withdrawal of the longtime major financier, the European Union (EU) which has opted to upgrade 1 200 kilometres of district roads in agricultural productive areas leaving the country’s roads at the mercy of mostly locally generated funding.
RFA public relations officer Masauko Mngwaluko said in an interview the expected revenue for the Roads Fund was K16.6 billion for road maintenance works and replacement of timber to concrete deck bridges as some of the road sector activities.
He said the increase in the fuel levy had contributed over 90 percent to the Roads Fund while funding to the sector remained inadequate.
Said Mngwaluko: “The road network requires to be optimally maintained. Our current sources of income are not adequate. We are, therefore, in the process of introducing road tolling. We are currently being advised by the Public Private Partnership Commission on this initiative.”
According to the progress report dated March 11 2016, the trend is expected to continue as the fuel levy might increase up to 11 percent of the pump price by December 2016.
Apart from the introduction of an adjustment system, RFA also plans to start making payments to contractors within four working days from seven days and introduce a Roads Fund bond to frontload financing of periodic maintenance of paved roads amounting to K5 billion with a repayment of three to five years.automated fuel levy
The automated payment system is expected to be effected by June 2016, introduction of a Roads Fund bond by June 2016 and introduction of toll fees by December 2016.
So far, RFA has approached six financial institutions who have submitted proposals in readiness for selection of the preferred bond provider.
Cabinet has since approved the proposal and the process to identify experts to carry out a feasibility study is underway.
The fuel levy is collected by Malawi Energy Regulatory Authority (Mera) from petroleum companies under the Petroleum Importers Limited consortium and it was increased from K32 per litre to K74.82 for diesel and from K37 per litre to K60.34 for petrol.
In March this year, government and the EU signed a $35 million (about K27 billion) for Rural Roads Improvement Programme in addition to a $69 million loan from the International Development Association of the World Bank and EU for improvement of the country’s main roads.