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‘Malawi might not need another Extended Credit Facility extension’

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The International Monetary Fund (IMF) has ruled out the possibility of extending its Extended Credit Facility (ECF) programme with Malawi after the lapse of the programme period on June 30, 2017.

The fund’s board has, however, since approved disbursement of a $26.9 million tranche to the country under the programme following its ninth and final review.

Responding to The Daily Times questionnaire yesterday, a few hours prior to the announcement of the approved disbursement, IMF Malawi Resident Representative, Jack Ree, said “Malawi is likely not to need an extension.”

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But Ree was still optimistic that the fund’s board would support a conclusion of the review and the completion of the current programme.

Since the beginning of the programme, IMF has provided about $191.4 million to Malawi.

The purpose of the funding was to support Malawi to rebuild foreign reserves, which was key to stabilising the kwacha, according to Ree, who expressed contentment with the country’s track record in implementing the programme amid some slippages.

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“There are many [achievements under the programme]. However, there are two major gains that we need to build on: the first one is our wins in the war on inflation. The other one is the gain in public management reform,” Ree said in an emailed response.

He further recommended the Malawi government to ensure that the gains in public finance management reform do not relapse.

“At the same time, we too need to deepen the public finance management reform, for example, to areas such as procurement. FY2017/18 can open a door to a new trend of robust growth and low inflation.

“But we need to stay the course. Malawi has sustained 3.6 percent average growth during the last five years when inflation was as high as 23.4 percent. During this time, sub-Saharan Africa grew by 3.9 percent with their inflation only at 8.1 percent. Just imagine how much better Malawi can perform when inflation comes down to 5-7 percent,” Ree said.

Meanwhile, after completing the ninth and final review under the ECF programme, the IMF board said the funds disbursed now are meant for macroeconomic stability, growth, economic diversity and reduced poverty, according to a statement posted on its website.

The IMF board, however, said the macroeconomic outlook remains challenging, reflecting uncertainties related policy slippages among others.

The EFC, approved in July, 2012 is the IMF’s main tool for medium-term financial support to low-income countries like Malawi.

And in an interview, professor of economics at Chancellor College Ben Kalua said the country needs to divert from entirely banking on the programme and instead, focus on rebuilding its private sector as a sustainable way of improving its forex base.

He said considering the state of the economy, the amount being disbursed under the programme over the years may not have had a substantial impact.

“There are a number of issues, one side of concern is that there are unreasonable conditionalities and we should not only be waiting for the IMF to tell us housekeeping issues.

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