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Government, IMF resume talks in September

Farayi Gwenhamo

SOSTEN GWENGWE

Discussions between the International Monetary Fund (IMF) and the government on a fresh Extended Credit Facility (ECF) programme are expected to resume next month, both parties have confirmed.

The government has been engaging the fund on the possibility of drafting a fresh ECF programme since 2020 when a previous programme was cancelled.

In an interview, IMF Resident Representative Farayi Gwenhamo said engagements on ECF are continuing and they are expecting the second mission in September.

“It will likely be a hybrid mission combining in-person visit to the country by part of the team and others joining mission discussions virtually from Washington DC,” Gwenhamo said.

In a brief response to a question on WhatsApp, Minister of Finance Sosten Gwengwe said the negotiations are progressing well and “we are at an advanced stage”.

Director for Centre for Research and Consultancy Milward Tobias said the delays in coming to terms on a new programme for Malawi is worrisome, especially after the local currency was devalued.

“We devalued the Kwacha without a substantial injection of foreign currency which has exacerbated the vulnerability of the local economy. A fresh programme could provide such an injection and boost confidence among the donor community but that has not happened and that is why our economy is troubled.

“When the conclusion of the discussions take long it means other donors that could inject foreign currency into the economy will continue to hold back. This is a serious concern,” Tobias said.

The first leg of the negotiations was concluded early in June with a determination by the Bretton Woods institution expected in July.

However, the IMF Executive Board Meeting schedule posted on the fund’s website in July, indicated that its Board would look at the cases of Tanzania, Germany and Kenya.

During the negotiations with the IMF, the local team was joined by a team of experts from the French firm, Global Sovereign Advisory (GSA), who assisted the local negotiators, especially on debt sustainability issues.

Such a programme will help unlock budgetary support, which has dried up in recent times in the absence of an IMF programme.

The development has seen Malawi facing an acute shortage of forex, resulting in delays to import critical requirements for the country, including medicine.

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