IMF deal cripples Nocma’s $75m fuel finance facility

National Oil Company of Malawi (Nocma) has disclosed that International Monetary Fund (IMF) delay to approve an Extended Credit Facility (ECF) with Malawi Government has crippled a $75 million fuel financing facility with Trade Development Bank (TDB).

The $307.2 million revolving facility which is under Reserve Bank of Malawi (RBM) has been instrumental for importation of fuel and other strategic commodities.

The tranche assists RBM in that fuel is imported on letters of credit (LCs) issued by TDB and the Central Bank repays the same after 90 days thereby giving time to source funds while ensuring a steady supply of fuel in the country

Nocma deputy chief executive officer Helen Buluma told members of the Parliamentary Committee on Industry, Trade and Tourism in Lilongwe yesterday that IMF has indicated that Nocma can only access the facility once debt restructuring is finalised.

She said: “Due to IMF negotiations with government on new ECF, the facility was taken as part of debt and it’s supposed to be part of debt restructuring, so as Nocma we were not able to continue tapping from it as we should despite the fact that the TDB gave us a nod. So we now have been forced to source financing from the local market.”

Buluma informed the committee members that Nocma has secured $10 million from National Bank, $18 million from Standard bank, 17.5 million euros from FDH Bank and $8 million from NBS Bank, and that the funds will be available by Monday next week.

She also disclosed that the State-owned company has secured a $50 million deal with the Arab Bank for Economic Development in Africa (Badea) on behalf of government.

Buluma also informed parliamentarians that she went to Saudi Arabia last week to finalise negotiations with Saudi Aramco to support Malawi with direct supply of the commodity.

In her presentation, she explained that Nocma has been rationing fuel because of foreign exchange shortages adding that the country needs $50 million a month for the commodity.

She further indicated that 6 million litres of fuel is enroute from the port of Beira and Dar es Salaam and another 10 million litres from Dar es Salaam adding that 72 tankers of diesel are also in transit to Malawi to be supplied to the manufacturing sector.

Said Buluma: “From January to June we imported 143 million litres despite the challenges. On average between those months, we managed to only get 30 percent requirement of forex so though we were importing it was not enough.”

On his part committee chairperson Simplex Chithyola Banda indicated that they were satisfied with the explanations and commended Buluma and her team for their efforts to avert a major fuel crisis.

Malawi Government and IMF mission team met in May to discuss a possible ECF deal. At the end of the meeting there were indications the IMF Executive Board would meet in July to grant Malawi the lifeline it desperately needs.

But since July, silence has left many enthusiasts in suspense as to what the future holds for the programme, necessary to open more doors for donor support.

Both Minister of Finance and Economic Affairs Sosten Gwengwe and IMF country manager Farai Gwenhamo confirmed that there is a planned mission this month to continue discussions.

Malawi is seeking a new ECF after cancelling the previous arrangement in September 2020, thereby forfeiting $70 million (K70 billion).