Malawi government is writing off the loans obtained at state-owned Malawi Savings Bank (MSB), most of which were borrowed by private businesses and individuals who are financiers of the ruling Democratic Progressive Party (DPP).
Treasury has asked the Reserve Bank of Malawi (RBM) to issue K6 billion promissory notes to take the toxic loans off the MSB books.
According to a letter reference number ST/3/10 dated April 20 2015, Secretary to the Treasury Ronald Mangani instructed RBM Governor Charles Chuka to issue the promissory note to MSB to clear the toxic assets.
Mangani said the maturity of the promissory notes have been spread from 2016 to 2019 and will be maturing at K759 million every quarter.
Reads the letter: “As you are aware that Malawi Savings Bank Limited which government wishes to dispose of had toxic assets amounting to K6 074 773 871.70 as at 31st March 2015. The government has, therefore, taken the decision to clear these toxic assets through the issuance of an interest bearing promissory note.”
In a letter to MSB chief executive officer Ian Bonongwe, Mangani said: “I write, therefore, to inform you that the government has resolved to hive off MSB toxic assets amounting to K6 074 773 871.70 and to replace them with a promissory note in this regard, I have already requested the Reserve Bank of Malawi to issue the promissory note for this purpose.”
In another letter also dated April 20 addressed to RBM Governor Charles Chuka, Mangani instructs Chuka to issue the promissory note.
“As you are aware, the Malawi Savings Bank Limited which government wishes to dispose off, had toxic assets amounting to K6.074.773.70 as at 31st March 2015, the government has, therefore, taken a decision to clear these toxic assets through the issuance of an interest bearing promissory note.
In this regard, we would like to instruct RBM to issue an interest bearing promissory note whose interest rate shall be at the rate of the 91-day bill of the first Treasury auction in any quarter plus two percentage points….,” reads the letter to Chuka.
Ministry of Finance spokesperson Nations Msowoya and Finance Minister Goodall Gondwe have kept their comments close to their chest.
Government is seeking financial strategic partners to finance MSB which is struggling to meet Basel II requirement and the bank needs a financial injection of K23 billion.
The Public Private Partnership Commission (PPPC) recently unveiled FDH Financial Holdings Limited, owners of FDH Bank, as the only bidder to become the strategic partner after offering K4.9 billion for the 75 percent of the bank’s shares.
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