President Lazarus Chakwera has dismissed suggestions that Malawi’s Extended Credit Facility (ECF) with the International Monetary Fund (IMF) is derailed, stating that it is “broadly” on track.
The President made the statement in Parliament in Lilongwe yesterday when he took questions from legislators that largely bordered on Malawi’s economic performance and governance issues in the 2024/25 financial year.
In response to a question from Leader of Opposition in Parliament George Chaponda on the status of the ECF programme, Chakwera said Malawi’s performance in the IMF programme was satisfactory despite the external shocks plaguing the country.
He said: “The programme has been largely successful. With our economic reforms and PFM [public finance management] laws we have enacted to operationalise them, we have managed to restore donor confidence.”
The President’s response was in direct reference to the resumption of direct budget support from the European Union (EU) and the African Development Bank.
The EU and other donors under the then Common Approach to Budget Support group suspended direct budget support to Malawi in 2013 amid revelations of plunder of public resources called Cashgate through dubious payments, inflated invoices and goods or services never rendered that exposed loopholes in the Malawi Government’s public finance management system.
The President also said there were improvements in several economic fundamentals, including inflation rate which has moderated from 32.3 percent in October to 27 percent last month.
But in real terms, the inflation rate is above the policy rate at 26 percent contrary to recommendations from the IMF and the World Bank.
Said the President: “We are also making progress with debt restructuring. We are in advanced negotiations with the Saudi Fund to restructure the debt we owe them. So, the problems that linger in our economy are a result of the factors that countries in a similar position to us are facing.”
Chakwera referred to the El Nino phenomenon, which destroyed farmlands and infrastructure in some parts of the Southern, Eastern and Central regions.
The disruption to the agriculture sector prompted the Reserve Bank of Malawi to trim the country’s growth projection from 3.2 percent in March to 1.8 percent last month.
The President also lamented that a large portion of the national budget is locked in statutory expenses such as wages and interest rates which he emphasised were carried over from the previous Democratic Progressive Party (DPP) administration in 2020.
But rising on a supplementary question, Chaponda, who is Mulanje South West lesgilator, chided the President’s financial management.
He said the President’s extensive domestic and foreign travels pointed to fiscal mismanagement that has plunged Malawi into debt.
Said Chaponda: “Mr President, you have gone on 60 foreign trips with large entourages. You are all over the country. The World Bank says Malawi is in fiscal distress, which means we are bankrupt and it has happened under this administration!”
Malawi’s total public debt stock has risen 368 percent from K4.1 trillion in 2020 when the Tonse Alliance dethroned the DPP to about K15.1 trillion (more than 80 percent of GDP) as of September this year.
On the other hand, domestic debt stock has soared to K8.01 trillion as the government continues to dip into the domestic market to finance budget deficits.
The external debt stock currently stands at $4.17 billion (about K7.3 trillion) of which $1.05 billion (K1.8 trillion) is owed by the central bank and $3.12 billion (K5.46 trillion) is owed by the government.
According to the IMF, one of the most urgent goals of the current ECF arrangement is to support the authorities’ commitment to restoring macroeconomic stability and creating an environment of low or moderate inflation and a stable exchange rate.
Reform efforts in the four-year programme, currently under first review, focus on bringing back the country to a sustainable fiscal path, rebuilding external buffers, restoring debt sustainability and external viability while mitigating the effects of El Nino-induced shocks.
In responding to a question from Kasungu North legislator Mike Bango (Malawi Congress Party) that government should revise Section 44 (1) of the Public Procurement and Disposal of Assets (PPDA) Act to allow contractors get works based on their capacity and history, the President said his administration is committed to empowering the powerless to remove monopolies which mostly favour advantaged people.
Section 44 (10) of the PPDA prescribes that 60 percent of all bids submitted should be given to indigenous contractors while others get the remaining 40 percent. But Bango noted that despite this consideration, most indigenous contractors lack capacity.
The President then decried the tendency of some contractors who deliberately underprice when bidding to win contracts and later revise the contract prices.
“This is one reason why people complain about delayed payments but it’s because of this tendency because to revise contract prices takes a process, it can’t just be done without any procedure,” he said.
Chakwera also announced that Malawian Airlines plans to introduce domestic flights to Mzuzu and Karonga by February 2025.
Besides, he said the airline was extending its routes to Rwanda, the Democratic Republic of Congo, Mozambique and Uganda.
The President was also asked on the need for timely implementation of Affordable Inputs Programme to avoid glitches that have seen most beneficiaries failing to redeem their inputs. However, he did not respond to the question on the hunger situation because the designated one and half hours had elapsed.
President Chakwera appeared in Parliament under Parliamentary Standing Order 70A (1) which compels the President to respond to legislators’ questions on matters of national and international importance
