By Cedric Nkungula
Donors continue to have overflowing confidence in Dr. Lazarus McCarthy Chakwera led government as World Bank Board of Executive Directors on Monday approved a $60 million grant meant to assist commercial banks in the country to have access to an imports backstopping facility from the International Development Association (IDA).
According to the bank, the project, De – risking Importation of Strategic Commodities (Disc) will establish a foreign currency trade facility for Malawi’s commercial banks.
The proposed facility, explains the Bretton Woods institution will provide correspondent banks with the assurance that the World Bank, standing behind the Reserve Bank of Malawi (RBM), will assume the payment obligations of the local issuing banks in the unlikely event that local banks default on their payment obligations for essential commodities.
In a statement, World Bank says the contingent financing to import fertilizers and pharmaceuticals will address critical shortages in the market which if left unaddressed, have the potential to hinder Malawi’s economic recovery.
“Specifically, the project provides backstopping support on the payment obligations of local issuing banks to their correspondent banks targeting the import of fertilizers and pharmaceuticals,” reads the statement in part.
“Currently, correspondent banks lack confidence to extend letters of credit to banks in Malawi due to the high – risk profile of local banks.”
