Malawi is at risk of losing K19 billion in European Union (EU) funding due to delays caused by the government in facilitating district councils to open foreign currency-denominated accounts with commercial banks.
The funds are meant for projects under the Greening and Growing Malawi-Ulimi ndi Chilengedwe m'Malawi (Uchi) project, which aims to boost smallholder farmers and agribusinesses in sustainable agricultural value chains. The EU had requested that these accounts be operational by the end of November 2024.
However, the Treasury's new regulations require all such accounts to be managed by the Reserve Bank of Malawi (RBM) instead of local commercial banks, creating a bottleneck in the process. A letter from the EU Head of Delegation, Rune Skinnebach, highlighted that the Accountant General had been instructed to guide district councils in opening these accounts, but despite several reminders, no action has been taken.
In response to the lack of progress, Skinnebach warned that if the accounts are not operational by January 13, 2025, the EU will be forced to cancel the funding agreements. This would result in a loss of K19 billion intended for agricultural and community development projects.
The delay has sparked frustration from local government officials, with the Malawi Local Government Association criticizing the government for failing to act on the matter. They argue that it is the same government that has been encouraging councils to seek alternative sources of revenue but has not supported such initiatives.
The Accountant General, Henry Mphasa, defended the government's stance, stating that allowing councils to manage foreign currency accounts directly would violate the Public Finance Management Act (2022). He explained that discussions with the councils had taken place, and a waiver had been granted, but a new directive now requires all foreign currency accounts to be handled by the RBM.
A meeting has been scheduled this week to discuss the way forward. The EU is hoping for swift action from the government to avoid terminating the funding and to ensure that the vital agricultural projects can proceed. The funding is seen as critical for supporting rural communities and fostering long-term economic growth in Malawi.
