Economists hail IMF ECF positive impact

The impact of the International Monetary (IMF) four-year Extended Credit Facility (ECF) is being felt through the outpouring of resources, with economic experts urging local authorities to do more to attract foreign direct investment (FDI).

In view of the IMF ECF worth $175 million (about K297 billion) sealed in November last year, Malawi has secured more than $457 million (about K776 billion)worth of grants and loans from its multilateral and bilateral donors that will be disbursed over four years.

Of the project support that has been officially announced, Malawi got a $77 million (about K131 billion) grant from the German government and a combined $380 million (K646 billion) from the World Bank which also includes $60 million (K102 billion) specifically disbursed to de-risk the purchase of critical imports such as fuel and fertiliser.

Speaking in an interview yesterday, economic analyst Exley Silumbu said foreign inflows are not surprising because the IMF has a widely touted “signalling effect” where official donors provide financial support to countries with the fund’s programme.

He, however, expressed optimism that the ECF programme will further entice foreign investors to invest in the country’s economy.

Said Silumbu: “The official and sustained foreign exchange into the formal system is exactly what the country needs to ease the forex constraints that have plagued the country in the past year.

“More than that, this should send positive signals to foreign investors to bring foreign direct investment into productive sectors of the economy for increased production and capital formation.”

He said investment has been too low in the past, resulting in weak economic growth.

In a separate interview, Dalitso Kubalasa, public resource management expert at the Parliament Support Programme implemented by Democracy Works Foundation and Democracy International, said he expects more donors to come forward with their investment into the economy.

He said: “It is true that the signalling effect is powerful, but it is much more than just the cash inflows.

“But I think we can expect more players like the Millennium Challenge Corporation to pump in resources if they feel Malawi is on track with the IMF programme.”

Malawi also received financialsupport pledges from the European Union worth about 117 million euro (about 213.18 billion) of which, 60 million euro was planned to be frontloaded into the economy to cushion against the devaluation of the kwacha and 57 million euro will be channelled to the education sector as direct budget support.