International Monetary Fund (IMF) resident representative Nelnam Koumtingue says Malawi has made progress in some areas in line with the four-year $175 million (about K306 billion) Extended Credit Facility (ECF), but challenges still remain.
In a written response on Friday, he said the ECF programme approved on November 14 2023, was meant to support improved macroeconomic stability, promote export growth, enhance foreign exchange availability and build foreign exchange reserves.
However, 16 months down the line, economic challenges, including high inflation rate currently at 30.7 percent and foreign exchange shortages remain.
Said Koumtingue: “While progress has been made in some areas, challenges remain. The IMF last conducted a programme review mission in May 2024 and discussions between the IMF and the Malawian authorities have continued.
“However, the review has not yet been completed and under our policies, ECF arrangements automatically terminate before their scheduled end if no programme review has been completed over an 18-month period.”
A handbook of IMF facilities for low-income countries indicates that ECF arrangements will automatically terminate before their scheduled terms if no programme review has been completed over an 18-month period. This gives Malawi two months to register a successful review with the Bretton Woods institution.
In November 2023, Malawi secured the IMF deal aimed at stabiliing the economy by unlocking direct budget support from multilateral institutions such as the European Union (EU), the World Bank and the African Development Bank.
Malawi has implemented a series of reforms that Capital Hill said were tough, but necessary to convince development partners that the Malawi Government is committed to reforms to revitalise the ailing economy, including raising the policy rate and devaluing the kwacha.
According to the IMF, one of the most urgent goals of the current ECF arrangement is to support the authorities’ commitment to restoring macroeconomic stability and creating an environment of low or moderate inflation and a stable exchange rate.
In December last year, in response to a question from Mulanje South West lawmaker George Chaponda, who is also Leader of Opposition in Parliament, President Lazarus Chakwera dismissed suggestions that the ECF is derailed, stating that it is “broadly on track”.
However, in January this year, Secretary to the Treasury Betchani Tchereni revealed that the Malawi Government had initiated discussions with the lMF to review some targets under the ECF programme, including disparities between programme assumptions and conditions on the ground, necessitating a reassessment of previously agreed targets.
He was yet to respond to our questions on the current status of the ECF programme.
Centre for Green Economy in Developing Countries global lead Velli Nyirongo, in an interview on Sunday said the delays in debt restructuring and rising expenditure constrain efforts to rebuild foreign exchange reserves, putting the ECF programme in jeopardy.
“Given the current geopolitical challenges and the decline in donor aid, Malawi needs the ECF,” he said.
Oxfam in Malawi country director Lingalireni Mihowa is on record as having said while the government has managed expenditure, revenue targets fall short, a development that points to some budget assumptions not materialising.
Reform efforts in the four-year programme, currently under first review, focus on bringing back the country to a sustainable fiscal path, rebuilding external buffers, restoring debt sustainability and external viability while mitigating the effects of El Nino-induced shocks.
