New International Monetary Fund (IMF) Country Representative Yugo Koshima has said sustained efforts will be needed to stabilise the Malawi economy as conversation is on-going with the authorities on a possible Extended Credit Facility (ECF) programme.
In June this year—over 12 months after the previous four-year $175 million (about K306 billion) ECF arrangement expired—an IMF team, led by Mission Chief Justin Tyson, engaged the local authorities towards securing a fresh programme.
However, the road remains long and winding, as programme negotiations continue.
Responding to an emailed questionnaire, Koshima said the discussions focus on macroeconomic stability— which is one of the key objectives of Malawi’s recently launched National Economic Recovery Plan (NERP).
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According to Koshima, since the IMF staff visit in June, productive discussions have been ongoing on a package of policies and reforms that could be supported under the possible ECF arrangement.
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“A possible ECF arrangement and the NERP would share the objectives of macroeconomic stability and inclusive growth. Home-grown policy priorities included in the NERP could be part of a policy package that would support a possible ECF arrangement,” he said.
In a recent interview, Treasury spokesperson Williams Banda said the government’s position aligned with that of the fund in ensuring prudence in the management of the fiscus towards economic recovery.
In May 2025, the government announced to have mutually agreed with the fund to terminate the four year $175 million programme, consequently forfeiting about $140 million.
An ECF programme is an IMF’s main tool for medium-term financial support to low-income countries and brings about financial assistance to countries, like Malawi, with a volatile balance of payments position.
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It helps mitigate foreign exchange scarcity on the market and is touted for its “signalling effect” of triggering direct budget support and restoring donor-confidence.
Commenting on the issue pertaining to the prevailing wide exchange rate gap between the authorised dealer banks and the parallel market, seen at over K2,250, Koshima said there was a need for enhanced effort to ensure that the two were aligned.
“We think a broadly unified rate encourages foreign exchange to flow through official channels, making it more accessible for legitimate trade and investment, and simultaneously curbing the distortions.
“That said, any exchange rate reform should be implemented as part of a comprehensive policy package for macroeconomic stabilisation, which includes fiscal discipline, sound monetary policy and reforms to boost productivity,” Koshima said.
He then hailed Malawi for efforts towards addressing some of the macroeconomic challenges it was facing.
He said, for example, that, in recent months, headline inflation had been moderating, reflecting lower food inflation.
Koshima said implementation of a comprehensive policy package, including fiscal consolidation and strengthened monetary policy, was, therefore, key to sustain the disinflation process in the medium term.
Giving a forecast for 2026 and beyond, Koshima said growth was expected to be slightly higher than the previous year, and that, in the medium term, growth was expected to be gradually accelerated by stronger investment and export, assuming strong reform traction.
“However, risks to the outlook are tilted towards a downside, arising from possible external, climate, and other shocks,” he said.
