In a significant move that will bolster the water supply system in Lilongwe City, the Malawi Parliament has passed a Bill authorizing the government to borrow K105 billion from two local commercial banks.
The loan will be used in the implementation of the Salima-Lilongwe Water Supply Project, also known as the Lake Malawi Water Supply Project, which is aimed to abstract and treat water from Lake Malawi at Lifuwu in Salima and transport it through a 112-kilometer transmission pipeline to Lilongwe City.
Minister of Finance and Economic Affairs, Sosten Gwengwe, announced Wednesday afternoon in the August House that the loan amount, which is equivalent to 30% of the total project cost, would be borrowed from National Bank of Malawi (NBM) plc and NBS Bank plc.
The remaining 70% of the project cost according to Gwengwe will be raised through private-sector participation.
“The board of the company is being restructured in readiness for new stakeholders. Tenure of the loan is five years, moratorium 25 months, and the loan will be at a floating rate of 4.5% on the part of NBS Bank,” said Gwengwe.
Meanwhile, Economist Betchani Tchereni welcomed the decision to borrow locally, stating that it was a positive development.
“Borrowing locally is a plus. You look at the amount being mentioned, which is rather huge, and government may not have that amount of money just sitting somewhere, it needs those resources to be found elsewhere,” said Tchereni.
The project will be implemented through a special purpose vehicle (SPV) called the Salima-Lilongwe Water Supply Company (SLWSC), established in 2017. The Secretary to the President and Cabinet (SPC) and Secretary to the Treasury (ST) are the shareholders, while the directors are the SPC, the ST, the Solicitor General, and Secretary for Justice, and the Lilongwe Water Board CEO.
This marks the first time the Malawi Parliament has passed a Bill to authorize domestic borrowing for the Lake Malawi Water Supply Project. The project is expected to commence after the full loan amount is raised.