Maravi

Govt seeks funds for Zesco's new projects

Govt seeks funds for Zesco's new projects
By Chiwoyu Sinyangwe
Sunday June 15, 2008 [04:00]

GOVERNMENT is seeking to contract new non-concessional external borrowing of about US$450 million (about K1.4 trillion) needed for Zesco’s implementation of new projects to expand electricity generation facilities. And the government has committed itself to paying all debts owed to Zesco by public institutions by the end of this year.

According to the Letter Of Intent dated May 7, 2008 written by finance minister Ng’andu Magande addressed to International Monetary Fund (IMF) managing director Dominique Strauss-Khan, the government is also in the process of adjusting electricity tariffs to reflect the cost of service.

Magande explained that Zesco was currently looking for financing to carry out three investment projects namely Kariba North Bank power station extension, Itezhi-Tezhi power station and at the same time to complete the rehabilitation project.

“The amount required is US$450 million about 1.4 trillion. Given the importance of raising electricity supply to achieve the medium-term growth objectives, as well as limited availability of grants or concessional financing, the government and or/Zesco may likely need to contract new non-concessional external borrowing for these projects in 2008,” he stated. “Government is conscious of the gravity of the current shortage of electric power and the risk it poses to sustained growth. Development of the electricity sector is vital to achieving sustained high growth and reducing poverty.”

And Magande said the Ministry of Finance and National Planning (MoFNP) was in the process of instructing all ministries, provinces and spending agencies to be paying their utility bills promptly.

“Further, as a first step to improve the financial footing of Zesco, the government will ensure that all arrears to Zesco from ministries, provinces and spending agencies are paid by end-December 2008,” Magande stated. “Moreover, the MoFNP will issue a circular instructing all ministries, provinces and spending agencies that all utility bills for each quarter are paid from quarterly budget funding and also that all funds released for payment of utility bills should not be reallocated to spending agencies.”

He also observed that there was need to strengthen policies to ensure that sufficient electricity generation capacity was installed as quickly as possible to meet a rapidly growing demand.

“To this end, government will develop policies with specific strategies to gradually adjust electricity tariffs to reflect the cost of service, increase operational efficiency of Zesco and strengthen its governance, and also ensure Zesco has sufficient resources to implement the planned rehabilitation and new projects,” stated Magande. “Given the urgency, government intends to complete this action plan not later than June 2008.”

Recently, IMF stated that Zesco was a financially unviable company that is incapable of mobilising resources for the necessary expansion of power generation and the electricity grid.

Labels: DOMESTIC DEBT, FUNDING, INFLATION, MAGANDE, ZESCO

posted by MrK @ 6:19 PM