Malawi Congress Party (MCP) has said the government’s move for a K45.2 billion bailout to State produce trader Agricultural Development and Marketing Corporation (Admarc) is an illegal spending because government did not seek approval from Parliament.
Last year, Treasury released money to repay debts Admarc owed three local banks after the State produce trader failed to recover the money from the sale of maize in the 2016/17 financial year.
This has led to Minister of Finance, Economic Planning and Development Goodall Gondwe to revise allocations in the Mid-year Budget Review to cover the Admarc bailout.
But MCP spokesperson on finance, Alexander Kusamba-Dzonzi in his official response to the Mid-year Budget statement delivered by Gondwe on Friday, said the bailout was not approved by National Assembly as required by law.
He said Section 63 (1) of the Public Finance Management Act (PFMA) empowers the minister to guarantee loans of statutory bodies. But he pointed out that the law was specific that this should be in the interest of the public and necessary.
Dzonzi said the fiscal chief received a prior approval from Cabinet to guarantee Admarc bailout “but it was not approved by Parliament.”
He said: “One wonders, are these actions legally binding? Malawi Congress Party does not believe this guarantee was done in good faith.”
Dzonzi said Gondwe did not inform the House the “exceptional circumstances” that prompted him to “depart from the principles of responsible fiscal management.”
He said: “MCP has failed to see any exceptional circumstances that would have forced our experienced Minister of Finance to depart from the principles if responsible fiscal management except that he has been forced to settle this loan to reward the ruling elite in DPP (Democratic Progressive Party) who are the true beneficiaries of the taxpayers’ money.”
Of the K45.2 billion Admarc bailout, a sum of K29.5 billion was repaid to CDH International Bank, K9.7 billion to Ecobank, K4.5 billion to FDH Bank and K4.7 billion to Capital Alliance.
In borrowing the funds, the parastatal was acting on government orders following the Malawi Vulnerability Assessment Committee (Mvac) report that about 6.3 million people faced hunger due to reduced maize harvest after the combined effects of drought and floods.
Admarc repaid the commercial banks K3.4 billion of its own resources. The grain trader is expected to pay back Treasury once the 90 000 metric tonnes in its stock is sold.
People’s Party (PP) spokesperson of finance, John Chikalimba also added his voice to criticise the bailout.
“This is very sad. As People’s Party, we are saddened that the bailout was only approved by Cabinet and not Parliament,” he said.
Budget and Finance Committee of Parliament chairperson Rhino Chiphiko also condemned the bailout, saying the whole arrangement was “calculated corruption.”
The Admarc the bailout will complicate 2017/18 budget implementation.
The Parliamentary Committee on Agriculture and Water Development chairperson Joseph Chidanti Malunga is on record to have said it would be a double blow on the taxpayers who, in the first place failed to buy the commodity, because its price was “so exorbitant”, to be expected to bailout Admarc.
Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa also called the Admarc bailout as outrageous.Follow and Subscribe Nyasa TV :