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Long wait for IMF programme

Malawi hopeful on ECF programme

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Malawians will have to wait a little longer for a new four-year Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF) as the fund has insisted on the release of the audit report on foreign exchange misreporting at the Reserve Bank of Malawi (RBM) that took place between 2017 and 2019.

Briefing reporters in Lilongwe on Monday, Finance Minister Sosten Gwengwe said the fund has also asked the government to come up with a comprehensive plan on public debt management, currently hovering at around K5.7 trillion.

Gwengwe said the government expects the audit report on foreign exchange misreporting to be finalised mid this month.

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According to Gwengwe, the first part of the negotiations was successful, as Malawi was able to negotiate with the IMF the structural benchmarks of the entire four-year ECF programme.

He said the final product of those negotiations is what is called the macro framework.

“I am very happy that we, with the team from the fund, have been able to negotiate all the structural benchmarks and been able to reach an agreement on how the ECF should look like for the four years and the macro framework is negotiated and agreed upon and we do have that one,” Gwengwe said.

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He noted that the Treasury and the IMF will now be going into the second leg of the negotiations, where Malawi will be expected to submit an audit report on foreign exchange misreporting by the RBM and provide a detailed plan of public debt management that would take Malawi from a debt distress country to a moderate risk nation.

The local Chancellor of the Exchequer said French debt managers, Global Sovereign Advisory (GSA), have indicated that they should be able to come up with a debt management plan in the next one to two weeks.

“In the next one or two weeks, when the two documents are ready, then we will reengage the IMF for a staff-level agreement which must be taken to their board on July 18, when our fate can be decided by the board.

“But we are hoping that a staff-level agreement can be reached soon enough once the misreporting audit and the debt plan are put on the table in the next one to two weeks,” Gwengwe said.

Asked why the issue of forex misreporting is still haunting Malawi despite the authorities coming out in the open to admit that Malawi erred, Gwengwe said the IMF would like to have an audit report which details the gravity of the problem.

He expressed optimism that the country would crack the nod of the IMF.

RBM Governor Wilson Banda was equally confident.

“We try to be very conservative in our pronouncements for obvious reasons because you cannot be someone taking the examinations and marking your papers at the same time.

“But if you ask me how I have rated the negotiations, I would say there is a huge, huge chance that, very soon, we will get on the programme because the moment you have agreed on the macroeconomic framework structure benchmarks and targets, essentially that’s the programme.

“These other two issues are not the programme. They are housekeeping issues. But the programme is you reaching an agreement on the macroeconomic framework,” he said.

In a statement yesterday, IMF Mission Chief for Malawi Mika Saito said while IMF support and its catalytic role in mobilising donor support are critical at this juncture, being able to restore debt sustainability and resolving the misreporting case are pre-requisites for such support.

Saito said, while the authorities are addressing these issues, the IMF team conducted a mission to agree on a macroeconomic framework, policies and reforms.

According to Saito, the IMF Mission welcomes the authorities’ recent steps to normalise the forex market in line with the recommendations of Article IV Consultation concluded by the IMF Executive Board in December 2021 to help improve foreign exchange availability.

“The special audit of the official foreign exchange reserves of the Reserve Bank of Malawi is now in the final stages. This report will form the basis for consideration of the pending misreporting of RBM Foreign Exchange Reserves by the Executive Board of the IMF.

“The authorities have engaged a debt adviser to support their efforts in addressing Malawi’s unsustainable public debt. As this work progresses, the discussions with the authorities will resume towards a staff-level agreement,” Saito said.

Malawi’s last programme with the IMF was cancelled in mid- 2020 soon after the Tonse Administration came to power in June 2020.

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