Economists have attributed Malawi’s recurring economic fragilities to low compliance to economic recovery and home-grown development programmes, including those with the International Monetary Fund (IMF).
The IMF records as of 2015, covering a period of between 1979 and 2012, show Malawi had agreed 13 programmes worth $627 million (about K1.1 trillion), but only four of them in 1982, 1988, 1995 and 2005, were completed, drawing just over $435 million (about K761.7 billion) of the combined total approved.
However, in 2018 the country agreed a 14th programme worth $112 million (about K196 billion) which the Tonse Alliance administration cancelled in August 2020 on grounds of unmatching priorities with programme conditionalities.
The announcement of IMF’s approval of the Extended Credit Facility (ECF) last November brought relief to Malawi, but economic experts say they have low confidence in fiscal authorities on finishing the programmes with compliance, given the poor track record.
Former Reserve Bank of Malawi and Ministry of Finance economist Lesley Mkandawire says there are several factors that lead to ECF slippages which Malawi is still vulnerable to.
He said: “In my view, the slippages in implementation of ECF programmes are a result of not prescription, but conditions [targets] set given to a patient on a deathbed; secondly, weak negotiating position in which authorities find themselves in.
“Thirdly, fiscal discipline of country authorities. They will have their reasons like political pressures, but some take advantage of this; fourthly, weak institutions mandated to carry out certain crucial mandates. Unfilled positions, absence of critical policies and strategies.”
Mkandawire, while observing that the culprit in many years of implementing ECF is slippage in fiscal targets which include expenditure and debt buildup, faulted IMF for setting conditions that are usually not for the
prescription to work.
In an interview, Catholic University of Malawi economics lecturer Ferdinand Mchacha fears for slippages in the current ECF programme in the run up to 2025 elections.
“Government over-expenditures, excessive local borrowing and corruption remain the key enemies of economic progress for Malawi. Unfortunately, as we are going towards elections and controlling government expenditure will be quite a challenging task,” he said.
University of Malawi School of Law, Economics and Government economics professor Winford Masanjala earlier linked the IMF program failures to lack of fiscal discipline that contributes to the non-compliance to conditions that underpin the programmes.
In his recent presentation when he engaged the Budget Committee of Parliament on the history of Malawi’s public debt, he said such indiscipline by fiscal authorities is also observed when it comes to Public Finance Management Act (PFM).
Ministry of Finance spokesperson Williams Banda asked for more time to respond to government’s commitment to adhere to the set conditions of the current IMF programme.
According to the IMF, one of the most urgent goals of the current $175 million ECF arrangement is to support the authorities’ commitment to restore macroeconomic stability and create 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.
The prevailing macroeconomic imbalance include low foreign reserves at about one percent of official reserves, high inflation rate projected to average 27.9 percent against the single digit rates, low growth rate projected at two percent against the targeted average of six percent
