TheÂ International Monetary Fund (IMF) andÂ Malawi have agreed on a new extended credit facility programmeÂ designed to improve the country’s foreign reserves, the Fund’s Mission Chief to Malawi, Tsidi Tsikata, said on Wednesday.
Tsikata, whose team has been in Malawi for the last two weeks, said the agreement has been reached and the executive will be meeting next month for approval.
â€œWe have reached anÂ understanding on a three-year medium term programme that can be supported by the IMF…we will be recommending to the executive board in July to approve the $157 million facility,” Tsikata said during a press conference after completion of discussions with government.
He said the Fund will cancel the $79.4 million facility approved in 2010 but went off track after government failed to devalue the kwacha and implement public finance management reforms, among other issues.
â€œWe hope that this will encourage Malawi’s donors, who have already pledged that they will support the 2012/13 budget, to quickly release their funds and make the country’s international reserves sustainable,” Tsikata said.
HeÂ also said government needs to start spending within its means to avoid what happened with the previous administration which resorted to massive borrowing.
Aid traditionally accounts for 40 percent of landlocked Malawi’s budget, but since last year donors stopped the funding after a diplomatic spat with Britain and the death in July of 20 people demonstrating against then president Bingu wa Mutharika.
But since Mutharika’s death from a heart attack in April, new President Joyce Banda has moved swiftly to patch up ties with donors and the IMF. She announced a 50 percent devaluation of the Kwacha last month.