By William Kumwembe
Malawians still have to wait a little longer—but this time around with a glimpse of hope—for a new Extended Credit Facility (ECF) Programme of the International Monetary Fund (IMF) which is aimed at boosting the country’s volatile Balance of Payment (BoP) position.
Also, the programme works as a signal to trigger budget support from other development partners.
At conclusion of Articles IV consultations with the country on Wednesday, the fund recommended that the Malawi Government institutes a special audit into the 2018 ‘misreported’ foreign exchange reserves figures, among other things.
“Directors noted potential non-complying disbursements during the 2018 Extended Credit Facility arrangement with the IMF and the need for resolution of this case of potential misreporting ahead of a new programme,” hints the fund in the statement.
Earlier, the Britton Woods institution wanted Malawi to address glaring issues which include rising public debt, currently hovering at around K5.5 trillion and the DPP administration misreporting to IMF on Gross Reserve Assets and Net International Reserves between 2018 and 2019.
Last week, Police arrested former Reserve Bank of Malawi governor Dalitso Kabambe and former Finance minister Joseph Mwanamvekha in relation to alleged misreporting of the forex reserves.
Beyond the audit, the Britton Woods’ institution has since also called on the local authorities to improve on quality of data reporting going forward.
The IMF directors also called for further efforts to strengthen public sector governance and institutions to safeguard scarce resources, strengthen policy effectiveness, and improve transparency
The fund stressed the need for determined implementation of policy adjustments to address Malawi’s macroeconomic imbalances, restore debt sustainability, rebuild external buffers and reduce poverty and inequality to improve social outcomes.
In June 2020, Malawi cancelled the previous ECF programme following a change of leadership after the Tonse
Alliance-led administration noted that some of the critical programme targets were missed.
Consequently, the country forfeited $70 million (about K53 billion) under the three year programme.
Treasury spokesperson Williams Banda yesterday said the government would work with the fund to ensure that
the audit is done in accordance with existing government procedures and regulations.
In a phone interview yesterday, local economist Betchani Tcheleni said the IMF statement gives a glimpse of hope for resumption of the programme but with a daunting task on authorities to address the bottlenecks.
“The mandate of the IMF is stabilisation. There has to be a stable macroeconomic environment and their
statement is loaded with issues that are looking into the environment.
“The audit is going to help us put our house in order. We need the ECF right now to help us cover for imports,” he said.
Experts have been saying that Malawi desperately needs the arrangement now to boost the BoP position and
mitigate the prevailing foreign exchange scarcity which has seen the local unit, the Kwacha, continue to nose-dive.