Malawi optimistic on new IMF programme


Fiscal authorities say they are optimistic of a new programme with the International Monetary Fund (IMF), whose mission is on a two-week mission in the country since Tuesday.

In an interview yesterday, Treasury spokesperson Davis Sado believes the IMF mission has come at the right time when most of the economic indicators are positive.

He said the structure of the new programme and its focus will be agreed upon after a thorough analysis.

Ree: We need to agree on plans

“We are looking at a programme that will focus on growing the economy. As government, we want to build on the economic gains we have achieved so far,” said Sado.

Having achieved macroeconomic stability with inflation rate now at 7.1 percent, low interest rates, a robust import cover of about five months, Sado said the focus is now on growing the economy and measures of cushioning it from exogenous factors such as droughts, floods and other weather and economic shocks.

The IMF mission’s visit led by Pritha Mitra follows the completion of the ninth review of the three-year $143.5 million (K106 billion) Extended Credit Facility (ECF) programme last June which according to authorities broadly achieved its macroeconomic stabilisation objectives.

Yesterday, the mission met fiscal authorities, monetary authorities and other economic players and their discussions centred on ways to safeguard and build on the gains in macroeconomic stability, particularly inflation, according to IMF country representative Jack Ree.

In an interview, he said the country needs to find ways of boosting investment in infrastructure, particularly electricity, in a manner that is fiscally sustainable.

“We need identify a few areas of structural reform, which is going to unlock private investment potential. We also need to agree on plans to further close the loopholes in the management of budget,” he said.

On Wednesday the team met the Ministry of Finance, Economic Planning and Development and the Reserve Bank of Malawi (RBM).

Their discussion centred on  recent developments in government revenues and expenditure, budget execution and plans, medium-term projections, debt management, balance of payments and exchange rates, financial stability and external assessment issues, said Ree.

Apart from meeting government officials, the IMF mission will also hold discussions with tobacco industry players, the business community and officials from statutory corporations.

In an interview on Wednesday, economics professor at University of Malawi’s Chancellor College said government should not be optimistic because the country has issues with domestic and foreign debt which are piling up every year.

“I can agree that other [economic] indicators are good but we should look at the issue of [foreign and domestic] debts. The IMF knows about these issues and has voiced their concerns before,” he said.

RBM’s Financial and Economic Review report for third quarter of 2017 has shown that public debt stock as at end of third quarter increased by 9.7 percent to K2.35 trillion from K2.15 trillion in the second quarter.

Of the total debt stock, K1.44 trillion is external debt and K910 billion is domestic debt.

Because of this, total debt to gross domestic product (GDP) ratio increased to 50.3 percent from 45.9 percent at the end of second quarter. n

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