Exactly 12 months after the unceremonious termination of the four-year $175 million (about K306 billion) Extended Credit Facility (ECF) with the International Monetary Fund (IMF), Malawi Government representatives are heading back to the boardroom to discuss a new programme with the Bretton Woods institution.
It is worth highlighting that the new move as confirmed by Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha comes barely eight months after a change of guard at Capital Hill after President Peter Mutharika and Democratic Progressive Party (DPP) trounced former president Lazarus Chakwera and Malawi Congress Party (MCP) in the September 16 2025 General Election.
When the previous ECF terminated automatically after going 18 months without a review, the immediate-past administration, which had wildly celebrated its approval in November 2023 as a game-changer, shifted the goal-posts, describing the terms of the deal it negotiated as unfavourable. Ironically, two months into office in September 2020, the same administration had cancelled a running ECF secured by the DPP administration on the basis that it was not in line with its priorities.
In pursuit of the IMF deal that ended in tears as it were, the MCP administration implemented two devaluations of the kwacha—one by 25 percent in May 2022 and another by 44 percent in November 2023. These negatively impacted livelihoods, although the authorities shed crocodile tears by claiming they found the very conditionalities they had agreed to earlier “potentially detrimental to the well-being of Malawians” having pleaded with the same people to endure swallowing bitter pills to get healed.
The collapsed ECF failed because of fiscal slippages and challenges with the foreign exchange system. In other words, the authorities failed to tame spending and manage the economy.
This time around, the IMF mission is due in the country between June 9 and 18 for negotiations towards a new ECF. Yet another dance, I would say.
Economists have so far advised the government to prioritise people’s welfare and Mwanamvekha, going by the interview he granted The Nation last week, stated that the DPP administration’s expectation is “to agree with the IMF only on those measures and reforms that will help to stabilise our economy, ensure fiscal discipline and consolidation, economic recovery and growth…”
Reform efforts under the collapsed ECF 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. But by May 2025 when it collapsed, inflation remained high, foreign exchange scarcity worsened and public debt soared.
For Malawi, macroeconomic stabilisation has always been the target in IMF deals. However, many times the targets are missed.
In the past week, The Nation also reported that Malawi Government is engaged in discussions for a fuel financing facility to ease queues and debt restructuring with the Africa Export-Import Bank (Afreximbank). Treasury data show that Malawi owes Afreximbank about $610 million, making it the largest commercial creditor.
Total public debt estimated at K23 trillion while interest payments are projected to rise to K2.7 trillion this financial year, equivalent to about 43 percent of domestic revenues
While they may not be the perfect tonic for treating an ailing economy like Malawi’s, traditionally, IMF programmes have the “signalling effect” of triggering direct budget support, although in recent years that impact has waned. This could also be attributed to Malawi’s ‘confidence deficit’ in the eyes of development partners coupled with legacy issues in the aftermath of Cashgate, the plunder of public resources at Capital Hill exposed in September 2013.
For a long time, poor public finance management and weak oversight have distracted Malawi from achieving stability and growth.
The IMF supports member countries’ own programmes with advice and financing. In this regard, authorities are expected to develop the details of their macroeconomic adjustment programme by establishing strong ownership and demonstrating a track-record of policy implementation.
The 2025 Article IV Staff Report offers some guidance on policy recommendations in the fiscal, monetary and financial, external and structural areas.” For Malawi, major obstacles to clinching a new ECF include the exchange rate policy.
In Article IV, the IMF advocates for an end to currency fixing while the Mutharika administration has vowed not devalue the kwacha. The IMF believes that a more flexible, market determined rate which for Malawi can largely be achieved through devaluation and flotation would help support macroeconomic stability and assist the economy to absorb shocks while rebuilding foreign reserves. On the other hand, the authorities argue that such a move could sharply raise prices and worsen inflation.
Malawians are tired of the endless experiments where they are used as specimen. They have swallowed bitter pills for long without healing. What they want now is not the endless merry-go-round, but policies that will uplift their economic status, those that will make them breath.
