Flagship projects funding falls short
Ministry of Finance and Economic Affairs has raised K22.48 billion in local currency infrastructure development bond, which is 55 percent less than the required amount to finance flagship development projects.
Data contained in the 2021/22 Annual Debt Report produced by the Ministry of Finance and Economic Affairs indicates that the amount raised represents 45 percent of the resources needed for the initial five out of 15 projects.
Treasury planned to raise K50.02 billion through three auctions of the infrastructure bond held in August 2021, March 2022 and April 2022.
Reads the report in part: “This is in light of the tight liquidity conditions that the market has been experiencing.
“Going forward, government will continue issuing the infrastructure bonds. It is also worth mentioning that some additional projects from the remaining 10 are now ready for implementation and that government will include them in upcoming issuances or auctions.”
In August 2021, Treasury rolled out the local infrastructure development bond programme to raise money for 15 high-value and high impact projects.
At that time, only five of the 15 projects were deemed ready for implementation and these are construction of the Kaphatenga-Dwangwa section of the M5 Lakeshore Road, Construction of the Ntcheu –Tsangano-Neno-Mwanza Road, Construction of the Acquatic Complex at the Kamuzu Institute for Sports in Lilongwe, Construction of the Jenda-Edingeni-Engalaweni Road and construction of the Dzaleka-Ntchisi-Mpalo-Malomo Road.
Minister of Finance and Economic Affairs Sosten Gwengwe did not respond to questions on when they expect the projects to be finalised.
But speaking in an interview yesterday, Malawi Stock Exchange chief executive officer John Kamanga said the capital market has capacity to finance such projects as evidenced by capital-raising by the Reserve Bank of Malawi through Treasury notes which were listed in December amounting to K1.1 trillion.
He said: “As Malawi Stock Exchange, we are always appreciative of the use of the stock market as a platform for raising long-term finance in form of debt instruments.
“We believe that this will help in financing government infrastructure projects at low cost, but at the same time help in deepening the capital market.”
Kamanga said at 45 percent, this is a positive development as the funds are raised are in line with the implementation of the projects.
“Therefore, you don’t need to raise the whole amount at once, but need to be rescheduled in the planned phases of the projects,” he said.
Market and investment analyst Cosmas Chigwe is quoted as having said that that given the current environment where the market is not that liquid, the response on the bonds is good.
The bond is meant to provide an investment outlet for surplus resources available in the economy and also finance various developmental projects.
