The International Monetary Fund (IMF) has urged the government to maintain a tight lid on public expenditure and ensure fiscal prudence to avoid slippages.
The fund says any slippages would have a negative bearing on the country’s strides towards economic stability.
The views are contained in the Bretton Woods institution’s documents for the First Review under the Staff- Monitored Programme with Executive Board involvement.
“Fiscal discipline, supported by a robust Public Financial Management system and timely production of comprehensive fiscal reports, remains critical,” the fund says.
It says concerted efforts by the authorities and other domestic stakeholders to prepare for fiscal financing challenges remains key.
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The fund also says price stability supported by fiscal consolidation is critical to prevent a further erosion of purchasing power for those living in poverty and food insecurity.
“Rebuilding buffers is critically important to reduce Malawi’s vulnerability to external shocks,” IMF says.
According to the IMF, local authorities are taking corrective actions necessary to demonstrate their capacity to implement the agreed macroeconomic adjustment and reforms, as well as to build the policy track record needed to support their prospective request for an Extended Credit Facility (ECF) arrangement.
But a closer look at the IMF’s position on Malawi, as indicated in its Country Report No. 23/299, highlights that there are huge milestones to be achieved by the local authorities.
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In an interview, a local economist Godfrey Kalinga, who once served as chief economist for the fund tipped Capital Hill to avoid populist spending if it is to attract the fund’s programme.
In an interview, Tuesday, Kalinga said he does not see the country securing a fresh ECF programme ahead of the election coming up in 2025.
“At the moment, the gap between the revenues and expenditures is very large and the government will need to look at particular activities that they will need to abandon or save and begin to meet the (IMF) targets. I think the gap is so large that the Minister of Finance alone can sit down and work out,” Kalinga said.
In a recent interview, Secretary to the Treasury Macdonald Mafuta Mwale said a number of interventions were deployed in ensuring prudence.
He cited accumulation of gross official reserves by the Reserve Bank, and adoption of public finance management reforms on the Integrated Financial Management Information Systems among the interventions.
Mwale said the government revenue target was also met.
However, as at the time of the review, the budget deficit target was not met because of the expenditure pressure emanating from economic shocks Malawi faced.
Minister of Agriculture Sam Kawale also said the government will implement the AIP programme within the approved K102 billion budget.
