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Fingers crossed

As IMF team jets in today for ECF talks

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Ben Kalua

The wait is over as the International Monetary Fund (IMF) mission team arrives in the country today for talks over a new Extended Credit Facility (ECF) programme which Malawi desperately needs to revamp the ailing economy.

Riddled by empty shelves, drug shortages and shutting down of travel agents, among immediate challenges emanating from an acute shortage of foreign currency, Malawi desperately needs the programme as a cushion.

The ECF programme will give a stamp of approval and instill confidence in donors that a particular country, in this case Malawi, has the right policy mix in managing its economy.

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Expectations are high among government officials and economic experts for a possible new programme.

Negotiations between the two parties have been going on for over two years after the government canceled a previous programme to create a new one, aligned to its vision.

Minister of Finance Sosten Gwengwe Tuesday said the government is looking for a successful process with the mission team which will help address some of the economic woes facing the country.

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“We see that the IMF has the most realistic way to stabilise our macro indicators. We will work with the fund in trying to address some pressure points of our economy such as the exchange rate, debt and subdued growth,” Gwengwe said.

Earlier, Gwengwe indicated that the country’s hope for a stable economy in the short term relies upon the IMF facility.

The ECF is available to countries facing a protracted balance of payments problem.

But access to ECF financing is determined on a case-by-case basis, taking into account the country’s balance of payments need, the strength of its economic programme and capacity to repay the fund, the amount of outstanding fund credit and the country’s record of past use of fund credit, and is guided by access norms.

Over the past six months or so, the contentious issue with Malawi has been the matter of foreign exchange misrepresentation to the IMF.

It is believed that the previous administration misreported on several occasions on gross reserve assets and net international reserves (NIR) for the period between 2018 and 2019, which remains a bone of contention between the IMF and the new administration.

Malawi was implementing the ECF from April 2018 and it was expected to run until April 2021.

Speaking in Lilongwe in October last year, IMF Director of African Department Abebe Aemro Selassie said the fund was seriously concerned about a misreporting case about some of the targets during the implementation of the cancelled ECF on former governing Democratic Progressive Party’s watch.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said, despite issues of misreporting in the previous regime, the Bretton Woods institution should understand that the current administration has done its best to rectify the issues.

“Apart from the facility, we hope that they will also help us look if we are prioritising debt well and we also hope that they will certify us as a country that can be loaned money so that other donors can open their taps for us,” Tcherenisaid.

Professor of Economics from the University of Malawi Ben Kalua, however, expressed worry that the discussions may be marred by history rather than the future.

“I wish we should be talking about economic growth without talking about issues of history because that is my fear,” he said.

If approved, the ECF programme being sought by Malawi will be the third in line.

The first ECF programme was granted on July 23 2012 and was worth $156.2 million.

The second ECF programme was granted on April 30 2018 worth $112.3 million.

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