Divergent views have emerged over the Malawi Government’s latest borrowing spree to finance road rehabilitations with a legal mind querying the legality of the arrangement and public finance analysts lauding the same as positive.
The reactions come in the face of the government committing taxpayers to repay K300 billion in fresh domestic bank loans over the next seven years.
To date, the government has secured K200 billion for the 58.4-kilometre Golomoti-Monkey Bay Turn-Off Road with K100 billion each from FDH Bank plc and National Bank of Malawi plc.
In the meantime, plans are underway to process a similar facility to fund rehabilitation of the 105km Karonga-Chiweta stretch on the M1. Besides financing the road projects, the government also borrowed K100 billion from FDH Bank for maize procurement by the National Food Reserve Agency (NFRA).
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha in an interview yesterday confirmed that with the exception of part of the NFRA financing, the other facilities were not provided for in the approved K10.9 trillion 2026/27 National Budget.
He said the road loans are being treated as off-budget because repayment will come from the road maintenance fuel levy via the Roads Fund Administration (RFA) over seven years.
“For the Mangochi-Golomoti Road, all that money is from the levy and will come through the Roads Fund Administration. That is why it is not included in the budget and we will do the same for the Chiweta-Karonga Road, about K100 billion or so,” Mwanamvekha said.
He said the NFRA loan would be repaid in two years from budgetary resources.
“As for NFRA, you know that we have K60 billion in the budget, so the K100 billion will be repaid in two years from the budget. Actually, some of the maize will be commercial and maybe they can even repay using that,” said Mwanamvekha.
RFA spokesperson Masauko Mngwaluko confirmed the Golomoti-Monkey Bay Road facility was secured through a financing arrangement with the two banks.
He said that the six-lane Saulos Klaus Chilima Highway and Mzimba Street were financed through a roads bond involving Standard Bank plc, Old Mutual (Malawi) Limited and CDH Asset Managers.
Said Mngwaluko: “The repayment period is within seven years using the fuel levy. We have authorisation as per law and from the Ministry of Finance. It’s a bond. We had the same arrangement on the Area 18 interchange.
“The money does not come into our account, but is paid to the contractors. When we get the levy, we deposit into the bank, it works that way.”
But Senior Counsel Kamudoni Nyasulu questioned the legality of servicing the loans from the fuel levy without parliamentary authority, observing that under Section 171 of the Constitution there ought to be authorisation while Section 172 provides that the funds should be deposited in Account Number One.
He said: “Under Section 173, no withdrawal from Account Number One can be made without Parliament.
“There is nothing technical here. Borrowing without parliamentary authority is a violation of the Constitution, illegal and criminal. It is a financial crime. The best way forward in such cases is to prosecute.”
Section 173(3) of the Constitution provides that “no moneys shall be withdrawn from the Consolidated Fund except in the manner prescribed by the National Assembly”.
But in a separate interview, Budget and Finance Committee of Parliament chairperson Sosten Gwengwe backed the approach, arguing that the approved budget deficit provides blanket authority to borrow.
He said: “The budget deficit is a blanket authorisation for the Minister of Finance to borrow domestically or externally as authorised by the budget. The six-lane [road] was also constructed in a similar fashion with Standard Bank and the interchange with NBS Bank.
“But what is worrying is to borrow for consumption. If we use loans to buy maize, it means Ministry of Agriculture needs to do more to produce enough so we can feed ourselves without recourse to borrowing.”
Gwengwe, a former Minister of Finance, said that if government uses the infrastructure bond, the projects must be included in the formal annual borrowing plans.
“Section of Public Finance Management Act only require the Minister of Finance to have cabinet approval before gazzeting,” he said.
Economist Milward Tobias agreed with Gwengwe, saying that what is positive in this is that borrowing is attached to a specific development project unlike when government borrows through Treasury Bills and money is spent on anything including allowances.
“The importance of the loans are not only in the roads but in how other economic activities will be developed along and in surrounding areas of the roads, to make maximum benefit from the roads,” he said.
In a separate interview, economist Velli Nyirongo said the expenditure case was strong, but procedure could not be ignored.
“Public borrowing creates a future obligation for taxpayers, regardless of whether the money is raised directly by government or through a public entity,” he said.
Nyirongo urged government to bring such borrowing within the normal parliamentary and budgetary framework and to disclose full loan terms.
The borrowing comes as public debt hit K23.9 trillion, or 90.9 percent of GDP, by December 2025. Debt interest payments are projected at K2.793 trillion in 2026/27, about 25 percent of total government expenditure.
Government also plans to finance a K2.852 trillion budget deficit, equivalent to 6.8 percent of GDP, through further domestic and external borrowing.
According to the International Budget Partnership, the rising debt burden risks crowding out spending on health, education and social protection, with low-income households bearing the greatest impact as resources are diverted to debt servicing.a
