Malawi Thursday got one hand on the highly anticipated four-year $174 million Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF) after reaching a staff level agreement with the IMF Mission that was in the country since September 12.
Following the agreement, the country awaits the all-important approval from the IMF Management and Executive Board, which is expected to consider Malawi’s case in mid- November.
IMF Mission Chief for Malawi Mika Saito told reporters in Lilongwe that the agreement is also subject to receipt of the necessary financing assurances by Malawi’s partners and creditors.
Saito said building on the track record under the Staff Monitored Programme with Executive Board involvement (PMB), the proposed ECF arrangement will support Malawi’s ongoing efforts to restore a stable and sustainable macro-economic position and growth envisaged under Malawi 2063.
The IMF Mission Chief observed that Malawi is recovering from a series of shocks, including an outbreak of cholera and Cyclone Freddy, adding that real GDP growth is projected to increase to 1.6 percent in 2023, with shortages of foreign exchange still weighing on economic activity.
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“The prospective ECF-supported programme will be aimed at restoring macro-economic stability, building a foundation for inclusive and sustainable growth, addressing weaknesses in governance institutions and strengthening resilience to climate-related shocks.
“Fiscal policy will aim at achieving a debt-stabilising primary balance in the medium term through a package of expenditure adjustment and revenue mobilisation measures. The authorities are committed to applying fiscal discipline, containing domestic borrowing and improving public financial management,” Saito said.
Finance Minister Sosten Gwengwe could not hide his excitement over the Staff Level Agreement.
According to Gwengwe, the ECF will send a strong signal to cooperating partners that Malawi is ready for business.
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The local Chancellor of the Exchequer said the negotiations have been protracted because it was not easy to put together a programme that works and delivers low inflation, which is necessary for Malawi to be on a growth path within the shortest time.
“Putting that type of programme together, stitching all the loose ends and negotiating on all the targets— on what needs to be done so that the economy heals, so that the economy stabilises and starts growing— was not the simplest of negotiations.
“But I am happy that the Mission Chief has announced that the programme is a strong programme, able to deliver if, going forward, Malawi sticks to that programme religiously,” Gwengwe said.
He was quick to note that Malawi intends not only to leverage on the funds from the IMF but also funds coming from other partners.
Among other things, Gwengwe said Malawi has a Development Policy Operations arrangement with the World Bank and other institutions that have pledged budget support, notably the European Union, indicating that some of them were just waiting for the signalling effect from the IMF.
Reserve Bank of Malawi Governor Wilson Banda said the prospects for sustainable recovery and growth are good.
“It’s taken us three years to get here. The ECF is good for the country. It speaks well of the government to manage the economy.
“Against a backdrop of multiple shocks to our economy in the past three years, we need the private sector to lead the recovery process. Government is creating an environment to do business,” Banda said.
