…says arrangement to provide relief from acute fuel shortage
By Blessings Chatha
The World Bank has said the recently adopted Government to Government (G2G) arrangement in the importation of fuel into the country will provide Malawi with temporary relief from acute fuel shortages.
This is the first time the bank-which is one of the country’s main traditional development partners has commented on the arrangement since it was announced by President Lazarus Chakwera last November.
The global multilateral lender has said this in its latest Malawi Economic Monitor (MEM) publication on Malawi which was released last week.
The publication analyses economic and structural development issues in Malawi and the latest 20th edition is part of an ongoing series published twice per year.
According to the bank, international experience has shown that G2G arrangements can provide relief to countries as they involve a longer repayment period.
“This may provide temporary relief from acute shortages of fuel,” reads the report.
However, the bank observes that the arrangement may lock the government into paying fixed prices significantly above the global price sometimes and such could also leave the National Oil Company of Malawi (NOCMA) as the sole importer of the commodity.
The bank also observes that currently, the supply of fuel has been reestablished in Malawi through a new credit line, and efforts to broker a bilateral fuel supply arrangement are advancing, although deeper structural problems persist.
After repaying an initial loan of US$50 million, NOCMA has secured an additional US$50 million in financing through a revolving trade-financing facility with the Arab Bank for Economic Development (BADEA) originally established in November 2022.
“New legislation passed in early December indicates a policy shift from open tendering to G2G agreements that include longer repayment periods. In January 2025, the authorities announced the procurement of 40,000 MT of diesel and petroleum from Abu Dhabi via an agreement with Kenya, and Malawi is developing its own G2G arrangements with Gulf nations,” it adds.
Chakwera announced the shift to a G-2-G fuel procurement method last November ostensibly to cut out middlemen, eliminate potential corruption along the supply chain and ease pressure on foreign currency externalisation through longer payment periods for fuel supplied.
In a national address, the President said his administration was mooting a G-2-G fuel deal with the UAE through flexible payment arrangements to avert perennial fuel stockouts.
Minister of Energy Ibrahim Matola told Malawi Focus recently that the government is not abandoning the Open Tender System immediately as it transitions to G2G.
“We are not abandoning the Open Tender System. The contracts are still going on until September 2025 and some even December 2025. With the G-2-G system, the goal is to increase the volume in the country,” said the minister.
Matola urged all Malawians to refrain from politicizing the fuel scarcity, stressing that the issue is affecting every Malawian including those in rural areas.