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IMF conditions under scrutiny

International Monetary Fund (IMF) conditionalities have come under scrutiny with analysts suggesting they could be causing social and economic harm to vulnerable populations if not implemented with caution and balance.

The assertions follow a discussion paper co-authored by IMF senior economists Emine Hanedar and Zsuzsa Munkacsi and published on the official IMF website.

IMF Working Papers describe research in progress by authors and are published to solicit comments and to encourage debate. However, the views expressed within do not necessarily represent the views of the IMF, its Executive Board or IMF management.

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In the discussion paper, which focuses on the interplay between quantitative conditionality and structural conditionality, the authors propose a delicate balance to ensure that quantitative targets such as spending limits do not compromise public service delivery, particularly in critical sectors such as health and education.

“If public health spending is not adequate and the health indicators worsen, there is a risk of not promoting growth, or not protecting the vulnerable,” it reads. “Additional fiscal pressures might also arise in the future.”

The authors further argue that reforms in critical sectors such as energy, pensions, health, education and public sector wages must be carefully managed to mitigate their negative impacts on vulnerable populations and ensure that the country’s development goals are not compromised.

The analysis coincides with public discontent towards some conditionalities such as the devaluation of the kwacha in November 2023 which the government said was necessary to enhance economic stability.

However, some sections of the public believe the measures have pushed the cost of living upwards and made life difficult for Malawians, most of whom live on less than $2.15 per day.

Reacting to the analysis, Scotland-based Malawian economist Velli Nyirongo urged the government to prioritise pro-poor spending by advocating for cuts in critical social sectors such as education and health.

In a WhatsApp response, he further said Malawi can leverage its relationship with the IMF to develop capacity building programmes,  drawing on the fund’s technical assistance to improve fiscal governance, monetary policy, and debt management.

Said Nyirongo: “Policies promoting inclusivity, such as support for small and medium-sized enterprises, rural development, and women’s empowerment, can help foster equitable growth.”

In an earlier report titled ‘50 Years of Failure’, ActionAid Malawi noted that austerity measures have resulted in job losses and reduced access to education and training programme in several sub-Saharan countries, including Malawi.

Another Economic commentator, Derrick Thomo observed that to make the most of IMF programme, authorities should negotiate conditions that reflect the cuntry’s needs, while using IMF support to strengthen institutions, akso improve policymaking, and also build a more inclusive economy.

“We can balance fiscal discipline with social spending by focusing on essential services like education and healthcare, while investing in areas that drive longterm growth. Transparent budgeting and efficient resource use are ofcause key,” he said.

The report prompted then Action Aid Malawi programmes and policy lead Wongani Mugaba to call for fairer tax policies to provide African countries with revenue to settle their debts, and by extension, limit their need for foreign debts and assistance.

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