‘Failure’ locks donor funds

Malawi is paying a heavy price for failure to adhere to procurement and financial management procedures in donor-funded projects prompting some donors to either revise downwards, demand refunds or withhold their funding. In the latest case the African Development Bank (AfDB) withdrew about K52.705 billion funding after revising the African Development Fund (ADF) 16 cycle for the period 2023 to 2025) that initially had a Performance-Based Allocation (PBA) of about K174.6 billion to about K121.895 billion. The funding was meant to finance the rehabilitation and upgrading of Kapichira, Nkula and Wovwe hydro power stations and Eastern Backbone 132 kilovolts (kV) Power Transmission Line as well as the Southern Africa Development Community (Sadc) Sub-Regional Transport and Trade Facilitation Project Phase Two.

Information in the AfDB’s 2025 Country Portfolio Performance Review undertaken every two years shows that the revision followed weaker Country Policy and Institutional Assessment (CPIA) and Debt Sustainability Assessment (DSA) scores. The report stressed that the reduction in funding directly influenced the scope of implementation of projects. Reads the report in part: “The bank consequently revised the IOP [Indicative Operations Pipeline-IOP], concentrating resources on only two of the four initially prioritised sectors: agriculture [Shire Valley Transformation Programme II, 20.0 million unit of account [UA]; “Agricultural Productivity and CommercialiSation Programme, UA 10.01 million and Wash [Rumphi Water and Sanitation Services Improvement Project, UA 23 million”.

In the report, AfDB further raised red flags on some projects and demanded a refund on some of the closed operations which had outstanding special account balances that were unjustified totalling about K94 million. The portfolio also recorded an aggregate disbursement rate of 32.31 percent and four operations were flagged for slow disbursement performance, according to the report. The four were Nacala Road Corridor Development Phase V at 15.62 percent effective November 2019, Support for Digitisation, Financial Inclusion and Competitiveness at 14.83 percent effective February 2022.

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Others are the Sadc Trade and Transport Facilitation Project at 0.29 percent effective December 2022 and Rumphi Water and Sanitation Services Improvement Project at 2.43 percent rolled out in December 2023. Further reads the report: “Additionally, several closed operations had outstanding special account balances that were unjustified and were due for refund to the Bank. These included Jobs for Youth Malawi Project (UA 26,032.60), Sustainable Rural Water & Sanitation Infrastructure Project (UA 8,575.92). “Following consistent Bank follow-up with the Government, some balances have been refunded, notably Catchment-Based Climate Resilient Water Security Project (UA 6,432.38),” it said, with all money to be refunded totalling K 94.37 million.” In a general assessment, the bank said that despite Malawi being a grant-only under ADF-16, poor disbursement and high share of red-flagged projects highlights the need for urgent improvement plan implementation and stronger government ownership to improve results.

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