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Government, International Monetary Fund dilly dally on new Extended Credit Facility

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Farayi Gwenhamo

The government and the International Monetary Fund (IMF) seem to be engaged in a hide and seek game on the negotiations of a new Extended Credit Facility (ECF) programme for Malawi.

The ECF provides financial assistance to countries with protracted balance of payments problems.

This follows a decision by the government to cancel the programme last year on account of changes in policy by the new administration following the June 2020 presidential election.

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The policy priorities in the previous ECF arrangement were aimed at entrenching macroeconomic stability, preserve debt sustainability and advance governance reforms.

In an interview late last month IMF Country Manager Farayi Gwenhamo indicated that the discussions with the government on the new ECF programme will commence towards the end of April.

But in a fresh interview on Tuesday Gwenhamo said the negotiations have not started yet.

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“We haven’t started. We are still in pre-mission discussions. I will revert to you soonest,” she said.

However, in a separate interview Treasury spokesperson Williams Banda indicated that the discussions are in progress.

“The discussions are progressing well and we will inform the general public once all is set. Obviously this will be before the end of the current fiscal

year. The new ECF program will be in tandem with the 2021/22 fiscal year,” Banda said.

Director of Research at Research and Development Associates Collen Kalua said the conflicting statements indicates the donors lack of interest to discuss the new program owing to recent report of misuse of Covid funds and government’s desperation to clear its image and attract development partners to the discussions.

“Revelations of misuse and plunder of Covid funds has affected the donors’ willingness to discuss anything with the government and that is why the government is arresting people to impress the donors.

“The negotiations will surely be done sooner or letter, however, if they are not done and there are no prospects of any funding from the donor community, we might see some technics from government to raise revenue in order to finance the budget,” Kalua said.

Last year the IMF disbursed about $192 million for emergency Covid support, $91 million in May 2020 and $101 million in early October 2020.

The first disbursement was 100 percent Balance of Payment (BOP) support and the second disbursement was 70 percent BOP support and 30 percent budget support.

According to information on the IMF website Malawi has outstanding purchases and loans amounting to SDR (Special Drawing Right) 300.16 million (about $433.11 million) as of December 31, 2020.

This is coming at a time the country’s revenue resources have been constrained witnessed by recent figures from the Reserve Bank of Malawi which show that domestic debt stock surged by K104.6 billion between November and December 2020 to K1.103 trillion.

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