Zimbabwe fails to settle US$20m bill for Malawi maize

The Malawi government will have to pay K2.8 billion to the Reserve Bank of Malawi (RBM) following failure by the Zimbabwe government to pay back money RBM paid on its behalf to local maize suppliers to export maize to Harare in 2007.
RBM records indicate that the loan should have been repaid by December 21, 2008, a date that was revisited following Harare’s failure to settle the bill. The date was extended to December 3, 2009, after which date Lilongwe will bear the legal responsibilities for repayment of the loan.
RBM General Manager, Wilson Banda, confirmed the development. He said the central bank chalked an agreement with the Malawi government, authorizing the bank to make available a US$100 million (K14 billion) facility to Zimbabwe from which funds were withdrawn to pay Malawian maize suppliers for the export of the staple food to Zimbabwe.
Under the Lilongwe-guaranteed facility, the Zimbabwe government was supposed to repay the money after every US$20 million (K2.8 billion) paid to maize suppliers.
“Things only worked well during the first year because the Reserve Bank of Zimbabwe was honouring the agreement. However, we were forced to suspend the facility in 2008 after Zimbabwe lapsed on payments,” said Banda.
Banda said, currently, Zimbabwe still owes Malawi K2.8 billion (US$20 million) and the government of Malawi is under obligation to pay back the money to RBM once the agreed period of payment lapses.
RBM is, meanwhile, exploring other means of forcing the Zimbabwe government pay, according to RBM officials.
RBM’s 2008 Annual Report indicates, however, that the central bank does not have any significant credit risk exposure on the facility with Zimbabwe since, in the event of default, the loss will be transferred to Malawi government by December 31, 2009.
The loan facility attracts interest at the three months rate of the London Interbank Offerage (LIBOR) plus 2 per cent and is repayable within ninety days of each advance.
The report further indicates that the loan was in arrears as at December 31, 2008 because it should have been repaid by December 21, 2008.
Officials at the Zimbabwean embassy in Malawi refused to comment on the issue, saying the central bank of Zimbabwe was best placed to shed more light on the issue.