Fiscal and monetary authorities have a torrid week starting today to convince the International Monetary Fund (IMF) mission team that the country is ready for the Extended Credit Facility (ECF) programme.
The in-person IMF mission comes barely a week after the fund’s second in command, Gita Gopinath, visited the country.
The visiting mission’s biggest task is to access the country’s performance under the Staff Monitored Programme with Executive Board involvement (PMB) that was approved in November 2022.
Finance Minister Sosten Gwengwe remained hesitant to jump to conclusions despite the country doing everything possible to meet the end-June targets under the PMB.
The elephants in the negotiation room have been the huge public debt and the realignment of the exchange rate.
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President Lazarus Chakwera has spent a good time in the past nine months engaging the country’s creditors, which include the Afreximbank, China and India, to consider restructuring the debt by offering the country a moratorium or, where possible, wipe it completely.
On the other hand, the Reserve Bank of Malawi (RBM) has been using forex auctions as a tool for allowing the Kwacha determine its ‘true value.
RBM spokesperson Mark Lungu yesterday said the mission is starting on a positive note following satisfaction with the government authorities’ efforts on reforms and achieving key indicative targets for June 2023 and working on structural benchmarks.
“This is what IMF was looking for; authorities to demonstrate a policy track record.
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“In addition, the discussions with creditors on external debt restructuring have also been going on well and almost reaching conclusion which has been largely acceptable and commendable by IMF,” Lungu said.
Malawi University of Business and Applied Sciences (Mubas) Associate Professor of Economics, Betchani Tchereni, on Sunday said Malawi desperately needs an ECF programme with the IMF.
According to Tchereni, as an economy, Malawi has Balance of Payment challenges that are deeper than the eye can envisage.
“Our external obligations are way too much and the ECF is a hope for relief. It is not the solution per se but it will provide a ground for other partners to have a trust in us.
“Without the EFC, we may have serious challenges to stock fuel, fertilisers, medicines in hospitals and other strategic commodities. We may also end up defaulting on some of the foreign debts that we have to pay in foreign exchange,” Tchereni said.
He added that default may mean Malawi’s credit worthiness becoming even worse than it stands now.
