International Monetary Fund (IMF) has maintained that poor fiscal discipline cost Malawi the four-year $175 million (about K306 billion) Extended Credit Facility (ECF) which automatically terminated due to lack of review last week.
Responding to The Nation questions on assertions by the Malawi Government that the ECF fell off because the fund insisted on conditions that could hurt Malawians, IMF resident representative Nelnan Koumtingue said their position remained that Malawi failed to meet benchmarks.
“Our position remains transparently explained in the FAQs. Fiscal discipline has proven difficult to maintain in the current environment due to elevated spending pressures and insufficient revenue mobilisation efforts,” he said.
During the opening of the 35th Malawi International Trade Fair in Blantyre yesterday, President Lazarus Chakwera insisted that Malawi opted out of the ECF because IMF was pushing for a fresh kwacha devaluation, upward adjustment of fuel prices and electricity tariffs and freezing expenditure into social programmes.
He said: “We can’t allow someone to come here with their money while their conditions will hurt Malawians because hiking electricity tarrifs is the same as killing businesses.
“Those who want to come with their money should help grow businesses and not the other way round. Its better we find we find those who can also listen to what we want.”
Ironically, under the collapsed ECF secured in November 2023, Malawi implemented a series of reforms that Capital Hill said were tough, but necessary to convince development partners about its commitment to reforms to revitalise the ailing economy. They included raising the policy rate and devaluing the kwacha first by 25 percent in May 2022 and by a further 44 percent in November 2023.
IMF said one of the most urgent goals of the ECF was to support the authorities’ commitment to restore macroeconomic stability and creating an environment of low or moderate inflation as well as a stable exchange rate.
Reform efforts under the suspended programme focused 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.
Malawi sought the new ECF after cancelling the previous arrangement in September 2020 barely two months after the Tonse Alliance administration led by President Lazarus Chakwera ascended to power.
