Malawians on Wednesday went to bed amid news that the $175 million four-year Extended Credit Facility (ECF) with the International Monetary Fund (IMF) had collapsed 18 months into the deal.
However, reasons did not come out clearly from the Malawi Government when announcing the “mutual agreement” to suspend the deal hitherto touted as tailor-made to help stabilise the country’s economy, were the reasons and Plan B to heal the economy reeling under high public debt.
Even yesterday, President Lazarus Chakwera and Minister of Finance and Economic Affairs Simplex Chithyola Banda claimed that ‘rigid’ conditionalities under the deal limited the country’s ability to spend on essential services.
But the Economics Association of Malawi (Ecama) and an individual economist have said the suspension reflected deeper governance challenges.
In an interview yesterday, Ecama president Bertha Bangara-Chikadza said low productivity, weak exports and delayed debt restructuring had already made compliance difficult.
“The government must roll up its sleeves. This is a chance to build resilience by managing public finances better, investing in productive sectors, and finding structured markets for local produce,” she said.
Bangara-Chikadza, who teaches economics at the University of Malawi in Zomba, added that Malawi must begin to fund its development ambitions through domestic revenue.
In a separate interview, Centre for Social Concern economic governance officer Agness Nyirongo said Malawi’s inability to meet IMF conditions result from long-standing institutional weaknesses.
“Poor financial management, weak oversight and lack of transparency continue to undermine fiscal discipline,” she said.
Nyirongo urged the government to ensure that reforms benefit ordinary citizens, saying “we need inclusive growth—jobs, services, rural development—and not just austerity to satisfy lenders”.
Speaking during the 27th Mzuzu University graduation in Mzuzu yesterday, Chakwera said the IMF’s demands came at a time when Malawi needed to increase, not cut, spending on social programmes and infrastructure.
He referred to the construction of Inkosi ya Makhosi M’mbelwa University and the Mzuzu Youth Centre as examples of projects his administration was determined to prioritise.
“We cannot build roads, pay teachers and fund university projects if we are forced to cut spending when the economy is struggling,” he said.
Responding to criticism on the fallen deal, the President warned against a “witchcraft mindset” that curses the country instead of supporting recovery.
“No one can take away the blessings that God has placed on our nation, not even the IMF,” he said.
In an interview yesterday, Chithyola-Banda said the suspension followed consultations with the IMF and was necessary due to proposed conditions he described as harmful.
“Further currency devaluation, increased utility tariffs, wage reductions, and a hiring freeze were deemed potentially detrimental to the well-being of Malawians,” he said.
The minister, who took office after the 44 percent devaluation of the kwacha in 2023, said his early priority was mitigating inflationary effects.
He maintained that Malawi values reforms, but wants externally supported policies to reflect local realities. “We advocate for reforms that are tailored to our unique socio-economic landscape”.
Ironically, the flopped ECF was negotiated by the Tonse Alliance administration after cancelling an earlier ECF secured by the Democratic Progressive Party regime which was described as having conditions not in line with the new team’s priorities.
Malawi sought the new ECF after cancelling the previous arrangement in September 2020. Following the cancellation, Malawi forfeited $70 million and total access under the cancelled three-year ECF was about $145 million, including the initial resource envelope of about $112.3 million approved in April 2018 plus $40 million under Augmentation of Access approved in November 2019
