This week, Minister of Finance Dr Ken Lipenga asked Parliament to authorise government to borrow about K25.2 billion ($76.5 million) from the Export-Import Bank of India. Part of the loan is scheduled to be invested in the construction of the much-talked-about 60 million-litre capacity strategic fuel reservoirs.
The minister said the other part of the loan will go towards several irrigation projects in Karonga, Salima and Mangochi as well as the Green Belt Initiative and construction of a sugar processing plant in Salima. Well, it sounds good on paper, at least that we seem to be borrowing for investment and not consumption.
It is my sincere hope that the fuel reserves will now be constructed for real. I am saying this because the strategic fuel reserves were initially planned for completion by January this year (yes, January 2012), according to a statement from the Ministry of Energy and Mining published in July 2011. That time, the project was estimated to cost about $25 million (about K8.2 billion).
Whereas the pending construction of fuel reserves in Blantyre, Lilongwe and Mzuzu is a welcome idea, looking at the whole scenario, I notice that generally, the problem in Malawi does not seem to be fuel shortage, but rather foreign exchange to import the fuel; hence, avoid the shortages. Our economy is yet to generate more foreign exchange through increased exports, something we have failed to do in the past 48 years largedly due to lack of seriousness and focus.
Without a corresponding increase in the availability of forex to import the liquidâ€”and other essential commoditiesâ€”in surplus and have 60 million litres reserved for the rainy day, the country would be wasting resources and give birth to yet more white elephants by building the reserves. That said, what happened to the rehabilitation of existing fuel storage tanks, with a combined two million-litre capacity, at Chilumba in Karonga, Chipoka in Salima and Mchinji? Donâ€™t they say a bird in hand is worth two in the bush?
During the debate on the loan, Kasungu Central MP Ken Kandodo, who is also Minister of Defence and a former minister of Finance, rightly said borrowing in itself is not bad as what matters is the purpose of the borrowing. That is correct as long as the borrowing adds value and the debt can be settled within an agreed time without driving the borrower into liquidation and utter ruin.
I was around in 2006 when 90 percent of our $3 billion foreign debt was written off under the Highly Indebted Poor Countries (Hipc) initiative. That was a big relief! But, sadly, since then, I have noted that we are slowly drifting back into heavy indebtedness.
I also recall in 2010 or thereabouts, after some observers expressed concern about increased borrowing, Kandodo described as â€œmoderateâ€, the $311 million Malawi had accumulated since debt relief.
In fact, a 2011 Reserve Bank of Malawi (RBM) economic report put outstanding public external debt at $848.1 million as of June 2011.
There are also other realities for us to consider. Malawi is not an island. It is part of a global family. Even as we speak, some of the richest nations in the world are making drastic cuts to public expenditure, implementing austerity measures to save their people from drowning in the whirlpool of national debt. I think these are lessons we should be learning from them.
If we are not careful, we run the risk of mortgaging this country and its people to Shylocks who will one day demand their pound of flesh. Please, borrow wisely!