The International Monetary Fund (IMF) has said a record of strong economic performance will be key to confidence building and unlocking of external finance to support public investment in the aftermath of the bank’s decision to approve a new Extended Credit Facility (ECF) for Malawi.
The new programme is worth $112.3 million and aims at entrenching macroeconomic stability.
Malawi’s economic growth jumped from 2.3 percent in 2016 to an estimated 4.0 percent in 2017, owing to a recovery in agricultural production.
In an emailed response, IMF Resident Representative to Malawi, Jack Ree, said authorities will now need to focus on remaining on track for the programme implementation and that with the right policies in place, Malawi should eventually be able to graduate from the IMF programme.
“This would require, among other things, strong and prudent fiscal and monetary policies and a track record of strong economic performance is key to confidence building,” he said.
The economy is still basking in the glory of gains made last year, a year, when all key economic indicators fell into place, riding on the back of a bumper harvest and strong monetary policies implemented by the Reserve Bank of Malawi.
Among others, in 2017, inflation made a historic turn to hit single digit at 9.3 percent in August, the first time in six years. The movement beat Reserve Bank of Malawi’s (RBM) prediction that inflation would move into the single digit lane by December 2017.
Over the following months, the inflation rate has been stable maintaining within the single digit trajectory, only quickening to 9.9 percent year-on-year in March this year from 7.8 percent in February.
The falling inflation prompted RBM to cut the policy rate thrice within a few months and commercial banks followed up the decision with cuts in their lending rates, making it cheaper for borrowers to finance their loans.
To beat inflation reversal going forward, the IMF has said authorities need to reign in on budget deficits and ensure that a credible policy framework remains in place to boost confidence in the market.
Finance Minister Goodall Gondwe has since describe the nod for budgetary support from the IMF as a development that has potential to boost donor confidence and unlock more support from other development partners.