US embassy cable - 05LILONGWE109

C O N F I D E N T I A L LILONGWE 000109 
 
SIPDIS 
 
STATE FOR AF/S ADRIENNE GALANEK 
STATE FOR EB/IFD/OMA FRANCES CHISHOLM 
STATE FOR EB/IFD/ODF LINDA SPECHT 
TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA/LUKAS KOHLER 
 
E.O. 12958: DECL: 02/03/2015 
TAGS: ECON, EFIN, EINV, PREL, MI, Economic, BUD FIN 
SUBJECT: MALAWI REPLACES RESERVE BANK GOVERNOR 
 
REF: 2004 LILONGWE 842 
 
Classified By: Econoff William Taliaferro 
 
1. (U) The GOM announced on Tuesday that Reserve Bank of 
Malawi (RBM) Governor Elias Ngalande is to be replaced at the 
end of his contract on February 28.  He is to be replaced 
with the recently retired chief executive and current 
chairman of Stanbic Bank, Victor Mbewe.  Stanbic is Malawi's 
second-largest commercial bank. 
 
2. (C) Ngalande's replacement has taken most observers by 
surprise, as he generally fits the technocratic mold of 
President Bingu wa Mutharika's government: he is a 
PhD-holding former university lecturer with a ready grasp of 
the technical intricacies of monetary policy.  During his 
five-year tenure as governor, he has maintained the RBM's 
reputation as a competent and efficient institution.  As 
reported in reftel, he has used every means available to 
maintain as solid a currency as the GOM's previously 
irresponsible fiscal policy allowed. 
 
3. (C) However, Ngalande has been suspected of declining to 
pursue politically connected financial institutions that may 
have been involved in money laundering.  This could well be 
part of Mutharika's motive in replacing him.  (NOTE: 
Mutharika was deputy governor of RBM under Ngalande before 
being appointed Minister of Economic Planning.  Whether he 
had first-hand knowledge of these allegations is not known. 
End note.)  As well, Ngalande is rumored to have privately 
opposed Mutharika's pet MK 1 billion ($10 million) rural loan 
scheme, which will leverage dormant RBM accounts to fund a 
microfinance project. 
 
4. (U) Ngalande's successor, Victor Mbewe, breaks the 
longstanding tradition of appointing brilliant technicians to 
head the bank.  Though Mbewe recently retired after a long 
career in banking, he came up through the human resources and 
administrative organizations of the parastatal Commercial 
Bank.  However, he led the bank through its privatization, 
its rebranding as Stanbic Bank, and the subsequent recovery 
to financial solidity. That he did so during the years when 
commercial banking grew fat from ballooning government debt 
apparently does not impinge on this reputation as a competent 
executive and knowledgable banker.  Mutharika recently 
appointed him to head the controversial MK 1 billion rural 
loan scheme mentioned above. 
 
5. (SBU) COMMENT: Mbewe's principal challenge will be to deal 
with the legacy of monetary overhang from former President 
Bakili Muluzi's regime.  He has a good staff of monetary 
experts under him to keep him on the right track, but whether 
he can maintain the relative independence Ngalande did, 
remains to be seen.  If Mutharika continues down the path of 
fiscal responsibility, and stays out of trouble with his 
donors, Mwembe's job could be quite a bit easier than his 
predecessor's. 
GILMOUR