Govt to verify K72 billion debt

President Joyce Banda’s administration has asked the Auditor General (AG) to verify the K72 billion (about $288 million) debt accumulated during the implementation of the abandoned zero-deficit budget.

National Audit Office (NAO) corporate communications officer Thomas Chafunya confirmed the task in an interview this week, saying the AG would be seeking to establish how such “huge” arrears came about.

In a written response to a questionnaire, Chafunya said before making any payment to suppliers, the Secretary to the Treasury (ST) will be writing the AG, submitting documents such as invoices, contract agreements and local purchasing orders (LPOs) for verification.

Said Chafunya: “The AG ascertains the authenticity of the claims and also checks whether the services were provided or the goods were delivered. The AG will then issue a Clearance Certificate upon finishing the audit and verification only when he is satisfied that the claim is genuine and valid.”

Tabling the 2012/13 national budget in Parliament last Friday, Finance Minister Ken Lipenga said it is estimated that government accumulated arrears in excess of K72 billion.

“The arrears are mainly on account of parastatal organisations where loans and overdrafts accounted for about K37 billion [about $148 million]; government departments have accumulated arrears of around K28.6 billion [about $114.4 million] and arrears accumulated on pension contributions, salaries, utilities and subscriptions are estimated at K6.1 billion [about $24.4 million],” said Lipenga.

In his breakdown of the arrears, Lipenga said the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) has K16.2 billion (about $64.8 million), Air Malawi (K5 billion or $20 million], the Malawi Broadcasting Corporation (K5 billion) and the Agricultural Development and Marketing Corporation (Admarc) K4.9 billion (about $19.6 million).

On government departments’ debts, the minister said the Malawi Police Service has K10 billion, Road Sector Projects has K8.3 billion, the Central Medical Stores K2 billion, the Malawi Housing Corporation K2.1 billion, the Malawi Defence Force K1.3 billion, the Malawi Prison Service K1.3 billion and Immigration Department K1.2 billion.

Lipenga said the government arrears also include rentals at K1.4 billion, the Office of the President and Cabinet has K590 million and the Electoral Commission has K407 million while the Ministry of Education salary arrears are K612 million and the National Compensation Fund has K627 million.

And speaking during the Malawi launch of the second edition of the Case Handbook in Blantyre on Monday, FMB director Sean O’Neill said it is important that government contains its appetite for domestic borrowing to stimulate more interest from domestic investor on the Malawi Stock Exchange.

O’Neill said it is disappointing that government ministries and parastatals accumulated the K72 billion in arrears as reported by Lipenga in his budget.

Observed O’Neill: “I am yet to get clarity as to whether, but I hope, this includes the staggering K70 billion accumulated by parastatals and ministries. Largely, the usual suspects are involved, but with a few new offenders such as the Smallholder Farmers Fertiliser Revolving Fund of Malawi with a scarcely believable K16 billion.

“The extent to which the previous government had us living beyond our means is apparent in the growth in government debt from virtually zero immediately after the post-Hipc [Highly Indebted Poor Countries debt relief initiative] to today’s position of K200 billion of domestic debt and K250 billion of foreign debt.”