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No respite in sight

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Even after International Monetary Fund (IMF) staff completed the mission to the Republic of Malawi, which largely bordered on the request for a four-year Extended Credit Facility arrangement, there is no sense of immediate hope in the horizon.

More so because, even after getting assurances from the Malawi authorities, the IMF has stuck to the point that Malawi, through the Reserve Bank of Malawi (RBM), should report the full extent of the misreporting that reportedly occurred under the Democratic Progressive Party administration.

Why the IMF would stick to something that happened in the past nobody knows.

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Meanwhile, the forex shortage problem in the country remains as prominent as ever.

We are surely facing a forex squeeze that has left second hand vehicle importers at the mercy of unknown devices.

What can they do when authorised dealer banks are prioritising pharmaceutical industry players and those that offer essential services— whatever essential services means.

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Maybe, to cut a long story short, it is important for you, dear reader, to get the information from the IMF’s mouth. This is what the fund indicated in a press release:

  • The Malawian authorities and IMF staff had positive and productive discussions on policies needed to restore macroeconomic stability, ensure public debt sustainability, and advance structural reforms to support sustainable and inclusive growth and address the impact of the Covid pandemic, spillovers from war in Ukraine and climate-related shocks.
  • The authorities’ recent decision to normalise the foreign exchange market to help address foreign exchange availability is welcome.

The near-completion of the audit of RBM foreign exchange reserves should pave the way for consideration by the IMF’s Executive Board of the misreporting of RBM Foreign Exchange Reserve case.

  • The authorities have recently engaged a debt advisor to support their efforts to address the unsustainability of Malawi’s public debt.

As work progresses on this process, IMF staff will be reengaging the authorities towards a staff-level agreement.

Washington, DC: An International Monetary Fund team led by Mika Saito held discussions during May 25- June 3, 2022, via hybrid and in-person meetings in Lilongwe on the authorities’ Request for a Four-Year Extended Credit Facility (ECF) Arrangement.

The authorities have requested an arrangement in the back of the protracted balance of payments problem. 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.

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

At the conclusion of these discussions, Ms. Saito issued the following statement:

“We had positive and productive discussions with the authorities on the current macroeconomic conditions and policies to steer the country towards macroeconomic stability and a sustainable debt path.

“We welcome 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 to improve foreign exchange availability.

“The special audit of the official foreign exchange reserves of the Reserve Bank of Malawi (RBM) 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 advisor 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.

“The IMF staff held meetings with Minister of Finance and Economic Affairs Sosten Gwengwe, Reserve Bank of Malawi Governor Wilson Banda, and senior government and Reserve Bank of Malawi officials, and the private sector.

The mission team thanks the Malawian authorities for their hospitality and productive discussions.”

In the end, whether there is hope for Malawi is up to you to make but, so far, Malawi can as well bank on itself.

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