Malawi used IMF SDRs to pay old debts—report

 ActionAid Malawi says the Malawi Government’s decision to use of International Monetary Fund (IMF) Special Drawing Rights (SDRs) amounting to $190 million (about K224 billion) to repay old debt was a missed opportunity to invest in health and education.

In August 2021, the global lender allocated SDR 133 million (about $190 million) to the Malawi Government through the general allocation to help member countries to cope with the economic fallout caused by the Covid-19 pandemic.

In its report titled ‘Fifty years of failure: The International Monetary Fund, debt and austerity in Africa’, ActionAid said Malawi used all its new allocations under the SDRs to repay existing external debts.

In an interview on Wednesday, Action Aid Malawi programmes and policy lead Wongani Mugaba said the SDRs would have had a bigger impact in the longer-term if the money was invested in health and education.

“The best way to use the SDRs would have been to invest in public health services through purchasing or replacing equipment, ensuring adequate stocks of drugs, recruiting more healthcare professionals and properly compensating them.

“Investing in public health services would have had a higher impact and for a longer period.”

Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said in an interview on Wednesday that using the SDRs to repay the loan was a good decision to keep the country from defaulting.

He said government would have lost more if it defaulted on the debt repayments that had become due at the time.

Said Tchereni: “The SDRs arrived at a time when the country was supposed to pay back a $100 million [about K118 billion] loan. Paying off the debt was part of the drive to stabilise the economy and put it back on track to recovery.

“If it was not for this allocation, Malawi would have defaulted on such maturing loans which would have worsened its creditworthiness, especially for possible future disbursements.”

Minister of Finance and Economic Affairs Simplex Chithyola Banda and Secretary to Treasuty MacDonald Mafuta Mafuta Mwale were yet to respond to our questionnaire.

SDRs are an international reserve asset created by the IMF to supplement the official reserves of its member countries