International Monetary Fund (IMF) has reacted to criticism of its policies, saying the programmes emphasise on the need to protect social spending in poor countries such as Malawi.
The response follows study by ActionAid International which faulted IMF policies in poor countries for having purportedly led to a deterioration of public services.
It also comes after the Malawi Government has repeatedly attributed the lapsing of the four-year $175 million Extended Credit Facility (ECF) with IMF to, among others, the Bretton Woods institution’s push for a fresh kwacha devaluation and freezing expenditure into social programmes.
But in response to The Nation questionnaire, An IMF spokesperson said the fund’s approach in Malawi balances fiscal responsibility with safeguarding vulnerable populations.
said the spokesperson: “The fund also emphasises the importance of good governance and transparency in public financial management. Citizens must have confidence that the taxes they pay are used effectively to deliver quality public services.
“Strengthening institutions and tackling corruption are, therefore, integral components of IMF-supported programmes.”
The spokesperson further said since 2019, the IMF has deepened its support for social spending through various measures, and these include social safeguards to ensure that fiscal consolidation does not harm investments in health, education, and social protection.
“The IMF’s recent ECF engagement with Malawi aims to balance protecting the vulnerable while restoring fiscal and debt sustainability. Research indicates that developing countries, including Malawi, have significant potential to increase revenues through equitable tax reforms,” said the spokesperson.
the spokesperson said to fund social programmes and manage debt, the IMF promotes revenue-focused reforms, including broadening the tax base, improving tax administration and adopting progressive taxes.
The ActionAid study found that in 2024, external debt payments as a percentage of national revenue stood at 25.4 percent while spending on health was at 5.74 percent and public sector wage bill as percent of gross domestic product (GDP) was 4.5 percent, but the IMF still called for cuts.
The report also showed that in 2024 alone, Malawi lost $51.3 million (about K89 billion) to illicit financial flows.
Under the collapsed ECF secured in November 2023, Malawi implemented a series of reforms that Capital Hill said were tough, but necessary to convince development partners about its commitment to reforms to revitalise the ailing economy. They included raising the policy rate and devaluing the kwacha first by 25 percent in May 2022 and by a further 44 percent in November 2023.
