By Kingsley Jassi:

The financing of the current account is in the spotlight as the World Bank raises concerns about credibility, suspecting misrepresentation of the actual Balance of Payments (BoP) situation following some unreported payment transactions.

The bank suspects that some large foreign payment transactions have been omitted from the BoP and their financing remains unclear, making it difficult to trace the source of the foreign currency used to settle these payments.

However, Reserve Bank of Malawi (RBM) spokesperson Mark Lungu, when asked about the issue, declined to comment and referred it to the National Statistical Office (NSO), saying that they are responsible as the primary authority on economic data.

When approached, NSO spokesperson, Sam Chipokosa, while suggesting that the data is compiled in collaboration with the central bank, promised to provide a comprehensive response later, but had yet to do so by press time.

An assessment by the World Bank, the results of which are contained in the Malawi Economic Monitor, indicates that there are omissions and errors involving large payment transactions.

“Large net errors and omissions in the Balance of Payment indicate a lack of transparency around the financing of the current account,” the bank raises the concern.

The report further mentioned that given insufficient export earnings to fund imports, Malawi has increasingly relied on foreign assets, external borrowing and grants to cover trade deficits.

“Net errors and omissions in the BoP act as a balancing item to ensure that the sum of the current, capital and financial accounts equals zero,” the bank says.

The bank further observes in the report that unrecorded transactions were captured, including informal or illegal activities and that may also reflect inaccuracies in data collection and reporting.

“While some degree of errors and omissions is common, large values indicate that the official data do not offer full clarity on the financing sources for imports,” the report reads.

However, the bank acknowledges that, in general, errors and omissions have been gradually decreasing from their 2021–2022 peak “largely due to increased statistical capacity through greater collaboration between the National Statistical Office and the RBM”.

Some former government authorities, including former governor of the Reserve Bank Governor Dalitso Kabambe, are currently answering charges related to the misreporting of foreign reserves positions.

It is alleged that they used to report borrowed foreign currency resources as proceeds of international trade, in a move considered to have been made in order to ensure that performance benchmarks were met.

This was allegedly done to meet the agreements made by the government at the time and the International Monetary Fund under the E