The International Monetary Fund (IMF) has said Malawi needs to ensure that it consolidates initial progress in public financial management (PFM) reforms and completes outstanding benchmarks in the area so it attracts donor confidence.
For IMF sound fiscal institutions and public financial management systems are essential if low-income countries like Malawi are to benefit from scaled-up aid and that such countries should prepare an action plan for strengthening their financial management systems.
This comes at a time when the IMF team is expected to visit Malawi in March for a follow-up mission for the ninth review under the Extended Credit Facility (ECF). The ECF agreement runs up to June, this year.
IMF Mission Chief for Malawi, Oral Williams, told The Daily Times in an emailed interview that Capital Hill should safeguard medium-term fiscal discipline and know that debt sustainability is necessary by improving revenue mobilisation and expenditure efficiency and creating fiscal space for social spending in pursuit of Malawi’s sustainable development goals.
He, however, admitted that since 2012, programme implementation for Malawi has been carried out in a difficult macroeconomic environment which has been made more challenging by two consecutive years of drought conditions.
“As a result, an estimated 40 percent of the Malawi population is at risk of food insecurity and in this context the Executive Board approved an augmentation of access under the programme ($49.2 million) to strengthen Malawi’s response to the humanitarian crisis,” said Williams.
He further said that the ECF has a maximum of five years and so no further extensions are feasible beyond end-June, this year.
In November, last year, IMF Executive Board approved— without an Executive Board meeting—an extension of Malawi’s arrangement under the ECF to June.
The move was aimed at providing additional timefor Lilongwe to achieve the programmes objectives, which is to spur growth, diversify the economy and reduce poverty.
Specific objectives of the programme include macroeconomic stability with low inflation, increasing international reserves to provide a buffer against external shocks, and reforms to improve the investment climate and promote sustained inclusive growth.
The approval to extend came at a time when the country was battling against food shortages due to El Nino-induced drought that continues to ravage Malawians.
Statistics from the government’s Malawi Vulnerability Assessment Committee (Mvac) and United Nations (UN) agencies such as World Food Programme (WFP) put the number of the hunger affected Malawians at 6.5 million out of 16 million population of the country.
President of Economic association of Malawi (Ecama), Henry Kachaje, at the time of approval, last year, was quick to say that the IMF’s gesture to extend without the executive board meeting showed that the current government is implementing positive reforms.
“This means willingness by the authorities to implement economic or financial reforms to benefit the country’s economy and masses at large,” Kachaje was quoted as saying.
The ECF arrangement was approved in 2012 in an amount of about S$146.7 million