Following successful implementation of a roads bond, whereby NBS Bank partnered Roads Fund Administration (RFA) in a K7 billion facility, the RFA has said it plans to use the bond for major projects in future.
In September 2017, NBS Bank issued a K7 billion road bond facility with the RFA to finance the rehabilitation and construction of a dual carriageway from Bingu National Stadium in Area 49 to Parliament Building in Lilongwe.
A bond is a debt investment in which an investor loans money to an entity.
RFA publicist, Masauko Mngwaluko, said the road bond facility, the first of its kind in the country, is one of the biggest successes for Malawi, in terms of mobilisation of resources locally.
He said, being a pilot initiative, the project is progressing well, which gives confidence that the roads bond is the way to go.
“This is money that is being generated locally through roads bond issuance. So far, looking at the works, we are registering great success and we are looking at using the roads bond as a spring board so that more projects can be financed using the bond,” he said, adding that the move was adopted as a strategic plan incorporated in the department’s reforms agenda, which were approved by the Reforms Commission in 2015.
Mngwaluko said this is one model that Malawi has never utilised.
“Previously, we have been relying on the fuel levy which contributes about 85 percent to the fund, but the roads bond is now a changer to how the fund mobilises resources,” he said.
The facility will be repaid over five years using the fuel levy which is managed by RFA and is payable by coupons at the 91-day Treasury bill tenor.
The 4.6-kilometre road is being constructed by Mota – Engil and the project is expected to be completed by September 2019.
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