Malawi government should reimburse K32.9 million meant for the Local Development Fund (LDF) supported public works programme (PWP) from Dowa district council if the global lender if to release any project funds.
The bank says Malawi can pay back the money in instalments.
Treasury spokesperson Nations Msowoya said Dowa will have to pay the money by itself and not the central government.
According to a letter that the World Bank country office has written to the LDF-Technical support team (LDF-TST), the unaccounted for funds were released by LDF under Masad III adaptable programme Lending II (APL II) that closed on June 30 2014 Masaf III which run between September 2009 and June 2014 was worth $114 million (57 billion) comprising three credits.
There was the original financing which was the LDF’s seed capital followed by $14 million (7 billion) first additional financing to help Malawi respond to the earthquake that hit Karonga and Chitipa as well
as droughts that affected other districts.
Lastly, the second additional financing of $50 million to help cushion the shocks of the May 2012 kwacha devaluation and other social protection interventions.
The World Bank decision to freeze advances means that its disbursements under Masaf IV that will be withheld with $107 million (around 53 billion) that was planned to be released between September 2014 and mid 2018 will be at stake.
World Bank country manager for Malawi, Laura Kullenberg said in a letter dated January 18 2015 that balances will be treated as lapsed loans and explained that “implications of having lapsed loans in your country portfolio is that the advance method of disbursement would not be allowed for any subsequent loans, credits or grants until the lapsed loans are fully resolved.”