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IMF nods to Malawi Rapid Credit Facility

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Betchani Tchereni

The International Monetary Fund (IMF) Tuesday nodded to Malawi’s Rapid Credit Facility (RCF) programme, allowing the country to access 50 percent of its quota with the Bretton Woods institution.

The IMF mission has made the revelation in a media statement yesterday, describing its discussions with Malawi’s representatives as “productive”.

“We had productive discussions with the authorities and made good progress on their request for a disbursement under the Food Shock Window of up to 50 percent of quota and the Staff Monitored Programme with Executive Board involvement,” the statement reads.

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RCF provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments (BoP) need with no ex-post conditionality where a full-fledged economic programme is neither necessary nor feasible.

The RCF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of crisis.

The RCF is available to PRGT-eligible member countries that face an urgent BoP needs.

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The facility is designed for situations where a full-fledged economic programme is either not necessary because of the transitory and limited nature of the shock, or not feasible because of capacity constraints or domestic fragilities.

The Food Shock Window of RCF is available through September 29 2023 for urgent BoP needs due to acute food insecurity, a sharp increase in the food import bill or a shock to cereal exports.

Eligible countries can have access to up to 50 percent of quota during the 12-month period from September 30 2022 to September 29 2023. Access under the Food Shock Window would be additional to the annual access limits of other windows.

The financing is expected to help the country meet urgent financing needs, including the implementation of support reforms such debt restructuring.

While confirming the development, Finance Minister Sosten Gwengwe said the government was awaiting formal approval from the IMF.

“We have obtained 50 percent of our IMF quota, plus we have not abstained anything. We have concluded a mission successfully and now await the board’s approval,” he said.

The minister said, unlike the Extended Credit Facility (ECF), which sees the Bretton Woods institution disbursing 100 percent to Malawi, the RCF is a route to ECF.

While applauding government for securing IMF support, Malawi University of Business and Applied Sciences Associate Professor of Economics Betchani Tchereni advised the government to use the resources to meet strategic needs.

“Well, this is something to smile about. The foreign reserves are heavily needed right now and, as such, the money couldn’t have come at a better time than now.

“However, we need to ensure that the resources are well utilised, especially on strategic needs. The government has to immediately start planning for the medium term so that when these resources have been depleted, it should be having reserves,” Tchereni said.

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