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30% RCF fund goes to National Budget

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GWENHAMO

About $30.6 million (about K22.9 billion) of the $102 million provided to the government by the International Monetary Fund (IMF) will go direct towards the 2020/21 National budget, the Treasury has said.

In an interview Ministry of Finance spokesperson, Williams Banda, said 30 percent of the amount will be for budget support and the 70 percent for Balance of Payments (BoP) position support.

He said other development partners have also committed to provide direct budget support this year but he could not give details.

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“These funds will reduce the budget deficit. However, other donors are expected to disburse some funds shortly and that again will help reduce the deficit further.

“It is premature to announce who the donors are but other donors will follow suit and their support will cover the deficit,” Banda said.

In an earlier interview, IMF Resident Representative, Farayi Gwenhamo, confirmed that the Fund gave consent that part of the $102 million RCF package given to Malawi recently goes directly into the 2020/21 National Budget.

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“The IMF normally provides BoP support only but during this exceptional pandemic-driven crisis, the IMF is providing budget support for expenditures that are directly related to Covid-19 such as medical equipment to finance the import component of this spending and thus reduce BoP pressures.

“In this regard, part of Malawi’s recently approved RCF proceeds will indeed go towards budget support,” Gwenhamo said.

On Wednesday last week Parliament approved a K2.1 trillion budget.

Minister of Finance, Felix Mlusu, indicated that total revenue and grants are projected at K1.435 trillion of which K1.116 trillion is tax revenue, K63.1 billion is other revenues and K255.7 billion are grants.

Mlusu further said the 2020/21 Budget faces a K754.8 billion deficit, which will be financed by foreign borrowing amounting to K224.8 billion and K530.1 billion from domestic borrowing.

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