Gwengwe must account for dubious guarantees
Make no mistake on these deals that involve sovereign guarantees—it is the Minister of Finance who is ultimately responsible for all the mess surrounding the controversial arrangements that now threaten Malawi’s international credit worthiness, its ability to control debt levels, stability of its public finances and the macro-economy in general.
Whether it is the Smallholder Fertiliser Revolving Fund of Malawi’s contract with Namibian-based Nendongo Commercial Group or the Ministry of Agriculture’s contract with Romanian company East Bridge and any other deals at any parastatal, ministry, department or agency of the Malawi Government that requires sovereign guarantees, Sosten Gwengwe must answer for them.
I mean, it is easy to point the finger at the Minister of Agriculture or even the Secretary to the President and Cabinet as the head of the public service, but these have no powers under the laws of Malawi over sovereign guarantees.
According to the Public Finance Management Act, it is the Minister of Finance who is not only responsible for issuing the guarantees, but also accounting for them to the people of Malawi through the National Assembly.
As Minister of Finance, the Public Finance Management Act orders Gwengwe to “oversee public resources and liabilities and provide a full account of the public resources and liabilities to the National Assembly.”
Gwengwe took the Khato Civils package of loan deals to the august House. Why didn’t he do the same with all these other controversial arrangements?
There are conditions precedent for the Minister of Finance to give guarantees to a body corporate, organisation or statutory body even where he determines it to be appropriate and in the public interest.
One of those conditions is prior approval of the Cabinet. The other is for the Minister, within seven days of giving the guarantee or indemnity, report the same to the National Assembly if the House is in session, and if not, at the commencement of the next ensuing session.
I wonder if Gwengwe did this on the Namibian and Romanian guarantees and if he did not, and I suspect he didn’t, then the President and the National Assembly must hold him accountable for clear disregard of the law and for presiding over this recklessness.
I mean, sovereign guarantees are contingent liabilities, which means they can affect Account Number One because if everything else fails, the Malawi Government will have to cough from the Consolidated Fund to pay off whatever loans East Bridge will have secured in the name of Malawi for this deal as a guarantor.
That is why I was shocked when I heard the other day Gwengwe giving the impression that he signed off on the deal because he was told to do so. I almost laughed my lungs out because that is not what a Minister of Finance does.
The Ministry has the Debt and Aid Debt and Aid Management Division (DAD) for a reason. It was created as an institutional structure that provides clear accountability and responsibility for managing debt.
DAD has experts who are there to help government secure resources—both grants and loans—in a cost-efficient and sustainable manner, in the right quantum and within the risk parameters and clearly set guidelines and benchmarks. I wonder about the extent to which this crucial division was involved in these deals, if at all—and why, if they were sidelined.
The Minister can also rope in the Reserve Bank of Malawi to help guide him, so Gwengwe really has not excuse for these blunders that are proving to be quite a distraction and a dangerous path for the economy.
For him to willy-nilly issue guarantees to ministries, departments, agencies and parastatals is being irresponsible.
Gwengwe must really be on top of his game because by the end of the day, it is him who must ensure that debts are paid and on time; it is him—with the help of highly educated experts in his ministry—who can understand the present and future costs and risks of the sovereign debt structure.
It is the Minister who has a fiduciary responsibility to determine the mix of debt types best suited to the government’s needs and risk tolerance, so clearly it cannot be free- for-all as Gwengwe is doing it and frankly I am very concerned that this Minister of Finance does not appear to fully grasp the enormity of what is happening and is allowing to happen around him and to the country’s public finances.
Frankly, Gwengwe is out of his depth and the earlier President Chakwera realised this, the better for his domestic agenda.
