IMF, treasury talks On topping up ECF

The International Monetary Fund (IMF) and Treasury are discussing the possibility of topping the $112 million (about K83 billion) loan under the three-year Extended Credit Facility (ECF) to offset the impact of Cyclone Idai.

IMF resident representative Jack Ree said in an interview yesterday that the magnitude of the additional support will depend on the extent of damage, losses, reconstruction plans and how this will affect the country’s balance of payment (BoP) position.

He said: “IMF is in discussion with the authorities on additional support through the existing ECF arrangement. As we communicated during the staff visit mission last month, performance under the ECF programme has been good with all but one of the quantitative macroeconomic targets met.”

The floods affected 15 of the country’s 28 districts, killing people, displacing thousands and damaging infrastructure such as roads and buildings.

 In March last year, the global lender approved a three-year $112 million (about K82 billion) ECF,  advising fiscal and monetary authorities to contain budget deficits, inflation rise and safeguarding and building on gains in public finance management reforms.

IMF last increased funding under ECF in 2016 by $76.8 million (about K57 billion) to counter the effects of floods and drought.

Minister of Finance, Economic Planning and Development Goodall Gondwe, who is Washington, United States for theWorld Bank/IMF Spring Meetings, could not be reached for comment.

But a Treasury official yesterday said a team has already been dispatched to the Southern Region to assess the impact of the floods on the economy, which also saw IMF reducing Malawi’s growth projections from five percent to three percent this year.

The official said the assessment will also take into consideration the stoppage in  trade activities which lasted for about three weeks due to destruction at Beira Port in Mozambique..

Reserve Bank of Malawi (RBM) statistics indicate that during the fourth quarter of 2018, BoP registered a surplus of $52.1 million (about K38 billion) compared to a deficit of $58.1 million (about K43 billion ) in the previous quarter and a surplus of $18.1 million (about K13 billion) in a corresponding quarter in 2017.

Foreign exchange reserves, on the other hand, were recorded at $750.1 million (about K549.8 billion) during the review period from $689.2 million (about K505.8 billion) recorded in 2018 third quarter, pushing import cover to 3.6 months.

Despite the floods, figures from the second round of crop production estimates project that Malawi will have a 355 000 metric tonnes (MT) maize surplus.

Maize output is projected at 3.35 million MT from 3.38 million MT during the first round of assessment, representing 24.36 increase when compared to the 2017/18 final output. n

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