The International Monetary Fund (IMF) has reduced borrowing costs for member countries and local economists say the reforms could create an opportunity for Malawi to benefit from the stability induced by the reforms.
The IMF executive board last week approved a reform that would reduce commitment fees and surcharges on loans, among other conditions.
lower IMF borrowing costs
In a statement posted on its website, IMF managing director Kristalina Georgieva said the package would reduce the cost of borrowing while safeguarding the Bretton Woods institution’s financial capacity to support countries in need.
She said: “The approved measures will lower IMF borrowing costs for members by 36 percent, or about $1.2 billion annually.
“The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.”
While acknowledging that Malawi may not directly benefit from the IMF reforms, Scotland-based Malawian economist Velli Nyirongo said in an interview on Monday Malawi could benefit from the stable debt levels that the low-cost financing will have on the more developed countries.
He said: “This, in turn, may lead to less volatility in global markets, reducing the risk of sharp increases in borrowing costs that could indirectly affect Malawi.
“Furthermore, as the reforms promote greater economic stability in neighbouring countries and key trading partners, Malawi may see improvements in regional trade, reduced external inflationary pressures, and a more stable macroeconomic environment overall.”
In a separate interview, public resource management expert under the Parliamentary Development Support Programme Dalitso Kubalasa said the IMF refrained from completely scrapping off the surcharges and commitment fees to compel borrowing countries to use their resources effectively.
He said: “Even if countries were given unlimited, cheap, or free access to IMF funds without conditions [such as interest payments or surcharges], they might not feel the need to be accountable or indeed to be careful about their economic policies.
“This could lead to the moral hazard problem, where countries might take risks or delay reforms, assuming the IMF will always be there to bail them out.”
Among the reforms that will take effect on November 1, the IMF resolved to reduce the margin over the Special Drawing Rights from 100 basis points to 60 basis points and raise the level-based surcharges from 187.5 percent to 300 percent.
The reforms, the first to be implemented since 2016, will also reduce the rate for time-based surcharges from 75 basis points to 100 basis points as well as increase the threshold for commitment fees to 200 percent of quota annually and 600 percent cumulative, from current levels of 115 and 575 percent of quota.
The reforms fell short of stakeholders’ request to completely scrape off the surcharges and commitment fees, but local economic analysts say the fund adopted a measured approach to encourage member countries to commit to prudent and sound public financial management.
