IMF grants Malawi K58bn waiver on misreporting case

The Inter n a t ional Monetary Fund (IMF) Executive Board has granted Malawi a waiver after revelations that the Malawi Government misreported its foreign exchange reserves position.

The decision to grant the waiver as requested by authorities in connection with the misreporting of the Net International Reserves (NIR) would see the country save about $58.7 million (about K58 billion) in the process.

IMF made the announcement in a statement issued yesterday after its Executive Board met on Wednesday to discuss the remedial actions linked to non-complying disbursements under the 2018 Extended Credit Facility (ECF) arrangement for Malawi.

Reads the statement in part: “In view of the authorities’ commitment to provide timely and accurate data to the IMF in the future and the remedial actions already taken, the executive board granted waivers for the non-observance of the performance criterion on the floor on NIR.”

In the statement, IMF deputy managing director Bo Li is quoted as having said that the remedial actions taken and the additional corrective measures to be undertaken are contributing to rebuilding the reserve assets of the Reserve Bank of Malawi (RBM) and are, therefore, appropriate to achieve the objectives under the 2018 ECF arrangement.

He said: “The IMF therefore looks forward to its continued close engagement with Malawi.”

Malawi misreported on its observance of the performance criteria on the NIR of the RBM, leading to the non-complying disbursements.

According to the IMF, at the time of the first and combined second and third reviews under the ECF arrangement, the NIR for end-June and end- December 2018 and end- June 2019 were incorrectly reported.

The IMF indicated that RBM’s gross reserve assets were overstated due to inclusion of both pledged term deposits and assets through contracting short-term swaps, whereas the technical memorandum of understanding definition of the gross reserves assets explicitly excluded both.

Minister of Finance and Economic Affairs Sosten Gwengwe in an interview yesterday described the news as positive for the country, saying it reflects government’s commitment to corrective measures to remedy the situation and strengthen the RBM’s reserve management.

He said: “Between 2018 and 2019, we got three disbursements of funds from the IMF which, were not supposed to get. We cheated our way to getting the money from IMF by providing that we were not accurate. This cost us and we were supposed to pay back this money.

The ECF arrangement was approved on April 30, 2018 for a total amount equivalent to $112.3 million to support the country’s reform agenda