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IMF halts Extended Credit Facility talks

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Farayi Gwenhamo

The International Monetary Fund (IMF) has put on hold talks over a new Extended Credit Facility (ECF) with Malawi until a resolution is made on the country’s debt sustainability situation, Country Manager Farayi Gwenhamo has confirmed.

This comes barely three days after the Fund’s Managing Director Kristalina Georgieva made remarks in a television interview in India that a country like Malawi, with no fuel and food yet with unsustainable debt, is difficult to enter for the Fund.

In an interview on Monday, Gwenhamo said the fund will only be engaging the local authorities on mapping the way forward.

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“We had some discussions, online, last week and we were supposed to continue this week with the in-person part of the mission. But now this is on hold. We had to reach a resolution around the debt sustainability issues,” Gwenhamo said.

She said regarding the misreporting case, the IMF received an audit report which the Fund’s experts are still scrutinising.

“We received that information (the audit) and now we are processing it and discussing with the authorities on collective measures to prevent such things from happening again, and at some point we will have to present the case to the IMF board, putting together the audit and the measures agreed upon,” Gwenhamo said.

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But in a recent interview, Minister of Finance Sosten Gwengwe said the decision was by the government.

“They notified us that they were coming but we have to agree on this before we confirm that they are coming. There is no point in having an IMF mission if they cannot accept a debt treatment that does not require the default element.

“There is a stand-off on this matter this far. We are continuing to engage in more donor inflows to lessen the debt treatment,” Gwengwe said.

Malawi University of Business and Applied Sciences-based economist Betchani Tchereni said the situation is dire, especially considering the country’s squeezed Balance of Payment position and its desperate quest for forex inflow.

He reiterated the need for the government to ban imports of all luxuries and commodities that the country can produce

“Without this [the IMF programme], it means that the very survival of our economy is in danger, at least in the short-term. There are so many commodities that we need but are not produced in Malawi. We need forex for them.

“In the long-run, it is imperative that we develop a hard rock stone policy stance on exports. Let us make sure the mining companies are here, the mega farms are here too. We need the IMF, mainly for the forex, if we are able to get our own, we will not depend on the IMF for stabilisation,” Tchereni said.

Total public debt stands at K5.8 trillion, representing 56.8 percent of the Gross Domestic Product.

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