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IMF demands credible debt restructuring

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The International Monetary Fund (IMF) has said Malawi must put in place a credible debt restructuring process before its executive board considers the country’s $88.3 million (about K91 billion) Rapid Credit Facility (RCF) programme.

Last week Malawi reached a Staff Level Agreement with the IMF Mission team on the ECF programme.

In a statement on Friday, IMF Mission Leader Mika Saito said the IMF staff is now preparing to present to the IMF’s Executive Board for approval Malawi’s request for emergency financing through the IMF’s Food Shock Window and for Program Monitoring with Board involvement as soon as possible.

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“To complement their strong reform programme, the authorities are implementing a comprehensive debt restructuring needed to restore debt sustainability.

“A credible process for the debt restructuring needs to be underway prior to the IMF Executive Board’s consideration of Malawi’s request,” reads the statement.

A credible debt restructuring plan also stands in Malawi’s way for an IMF Extended Credit Facility (ECF) programme.

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According to the IMF, the emergency financing under the new Food Shock Window would help Malawi address urgent balance of payments needs related to the global food crisis.

It says Programme Monitoring with Board involvement will support the government’s economic reforms to restore macroeconomic stability and provide the foundation for an inclusive recovery.

“The authorities are strongly committed to continuing their efforts to implement structural reforms and prudent macroeconomic—fiscal, monetary and exchange rate—policies, which, together with the ongoing debt restructuring process, will steer the country towards macroeconomic stability and a sustainable debt path.

“In turn, this will help to set the foundation for inclusive growth and improve the life of Malawians,” Saito said.

Finance Minister Sosten Gwengwe last week said the government was awaiting formal approval of the programme from the IMF.

Mid this year, Malawi engaged a French firm to help it with crafting a debt sustainability plan.

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