IMF increases borrowing quota, analysts cautious

Malawi and other IMF member countries have an opportunity to boost their capacity to borrow more from the fund after its board of directors approved a proposal to raise countries quotas by 50 percent.

But economic experts have cautioned that despite this presenting an opportunity, authorities should be mindful of International Monetary Fund (IMF) conditions and strive to reduce the ballooning foreign debt.

This means that Malawi can increase its quota from the current special drawing rights (SDRs) of 138.8 million (about $186.33 million) to about SDR208.2 million (about $279 million) next year.

A statement posted on IMF website says the approval, which follows a recommendation from the fund’s executive board, also provides guidance on the size of the global lender’s lending capacity and the mix of resources.

Reads the statement in part: “The resolution envisages maintaining the IMF’s current lending capacity through a combination of the approved increase in quota resources and reduced reliance on borrowed resources.”

IMF managing director Kristalina Georgieva is quoted in the statement as having said that the approval and subsequent increase in the quota will reduce reliance of the fund on borrowed resources, restore the primary role of quotas in lending capacity and reinforce the role of the IMF at the centre of the global financial safety net.

“It will also strengthen the IMF’s capacity to help safeguard global financial stability and respond to members’ potential needs in an uncertain and shock-prone world,” she said.

Commenting on the development, Economics Associations of Malawi president Betchani Tchereni said the revised quotas present an opportunity to Malawi to borrow more from the IMF.

He said: “Malawi needs to be producing. Increasing the quota means Malawi does not want to produce and still wantS to depend on the IMF.

“We must show intent that if we are increasing the quota, we should have a specific objective.”

In a separate interview, Malawi University of Science and  Technology economics lecturer Bertha Bangara Chikadza said while there is an opportunity to borrow, local authorities should be mindful of the conditionalities that follow IMF loans and strive towards eliminating debt.

She said: “IMF loans are not always palatable to the populace. All we need is to be prudent in our spending and reduce borrowing, not only from the IMF but from all other lenders and borrow when we have really exhausted all our opportunities in trying not to borrow.”

Under the IMF and other quota-based system, countries can only borrow as much as they have deposited with the Bretton Woods institution.

In November, the IMF approved a four-year Extended Credit Facility worth about $175 million, which was 95 percent of Malawi’s quota.