IMF set for Malawi programme review

The International Monetary Fund (IMF) says its mission is expected to hold discussions with Malawi Government authorities on the second review of Malawi’s Staff Monitored Programme with Executive Board Involvement (PMB) early next month.

The programme was approved in November 2022.

In a letter dated August 25 2023 addressed to Minister of Finance and Economic Affairs Sosten Gwengwe, IMF mission chief Mika Saito said the mission, which will be in the country from September 12 to 19, will also take stock of progress towards building a track record for an Extended Credit Facility (ECF) and possibly move ahead with programme discussions.

She said: “Prior to the in-person mission, we will hold virtual pre-mission technical discussions during August 29 to September 8 2023, with teams at Ministry of Finance and Economic Affairs, Reserve Bank of Malawi and others involved in the implementation of the PMB.”

Among others, the PMB demands that the country resolves economic challenges such as rising inflation rate, currently at 28.4 percent, build foreign exchange reserves and align the foreign exchange rate as well as restructure debt.

The PMB was approved by IMF executive board in November 2022, together with a disbursement of $88.3 million (about K91.4 billion) under the Rapid Credit Facility (RCF) Food Shock Window to support the authorities’ efforts in building a track record for an ECF and to improve the lives of Malawians.

Economists credit ECF as a more reliable programme that provides financial assistance to countries with balance of payment problems.

On July 28 this year, an IMF mission visited Malawi to conduct the first review of the country’s performance towards qualifying for the ECF and suggested that Malawi was on track under the Staff Monitored Programme.

However, there were concerns on other key indicators such as public expenditure and rising public debt.

In a brief interview on Saturday, Gwengwe expressed optimism on the discussions.

“We hope to have built enough track record with the Rapid Credit Facility to transition to an Extended Credit Facility,” he said.

Last week, the European Union (EU) Ambassador Rune Skinnebach told The Nation that he was hopeful the forthcoming IMF assessment mission on Malawi’s performance will lead to the clinching of the ECF programme.

He said while the IMF’s ECF will not instantly rectify the structural deficit facing Malawi, it will bring in foreign exchange and have a catalytic effect on many development partners, including the EU to resume direct budgetary support.

ECF provides medium.