The International Monetary Fund (IMF) executive board will today decide whether Malawi qualifies for an Extended Credit Facility (ECF) programme that government and its development partners believe is critical to unlocking direct budget support.
Information posted on the IMF website shows that the board is expected to assess a second review of the Staff Monitored Programme with Limited Board Involvement (PMB) and Malawi’s request for the ECF.
The move follows a review mission in September led by IMF deputy division chief for the African Department Mika Saito, which agreed a four-year ECF programme worth about $174 million to replace the PMB that expired last month.
The agreement, expected to be anchored on a set of fiscal and economic policies designed to restore macro-economic stability and build a foundation for sustainable growth, is subject to IMF management and executive Board approval and receipt of the necessary financing assurances.
Malawi has implemented a series of reforms that Capital Hill said were tough, but necessary to convince development partners that policymakers were committed to reforms to revitalise the ailing economy.
Since the government signed the PMB in November 2021, the Reserve Bank of Malawi has raised the policy rate three times from 12 percent to 24 percent. The central bank has also devalued the kwacha twice, first by 25 percent in May last year followed by the recent 44 percent devaluation last week.
In a statement in Parliament yesterday, Minister of Finance and Economic Affairs Simplex Chithyola Banda said the measures were necessary to restore economic stability and donor confidence, adding that the devaluation will pave the way for an ECF programme with the IMF.
But when queried by Mzimba North lawmaker Yeremiah Chihana (Alliance for Democracy) on the measures and financial packages included in the ECF to stimulate growth, the minister said he could not provide further details.
“We cannot discuss the ECF right now. But Malawians expect me to present good news later this week,” said Chithyola Banda.
In May 2020, the fund approved a disbursement of $91 million under the Rapid Credit Facility to help Malawi meet the urgent balance of payment needs stemming from the Covid-19 pandemic.