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Put economy in order—IMF

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The International Monetary Fund (IMF) has said there are several issues that the Malawi Government must address before signing a new Extended Credit Facility (ECF) with the Bretton Woods institution.

IMF African Department Director Abebe Aemro Selassie said this in Lilongwe after meeting President Lazarus Chakwera, Vice President Saulos Chilima, Finance Minister Felix Mlusu and Reserve Bank of Malawi (RBM) officials.

Selassie, who was accompanied by IMF Mission Chief for Malawi Mika Saito, said the speed at which the Bretton Woods institution would sign a new ECF programme with Malawi would depend on the speed at which the Tonse Alliance-led administration would address legacy issues in the economy inherited from the Democratic Progress Party (DPP) regime.

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The issues IMF officials want Malawi to address include public debt, currently hovering at around K4.7 trillion, and the DPP administration misreporting to IMF on Gross Reserve Assets and Net International Reserves for 2018 to 2019.

Selassie added that the IMF would like to appreciate how the Malawi Government intended to implement development goals it has set.

“These couple of issues need to be addressed and, as soon as they are addressed, we should be in a position to move forward with the programme with the IMF,” Selassie said.

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On his part, Mlusu said the Malawi Government was committed to ensuring that it enters into a new ECF programme with the IMF.

Mlusu said Capital Hill was already working on legacy issues raised by the IMF to ensure that they are addressed with speed.

In June 2020, Malawi cancelled the previous ECF programme following a change of leadership after the Tonse Alliance-led administration noted that some of the critical programme targets were missed.

Last week, Mlusu said Malawi was failing to access $300 million [approximately K247 billion at the current exchange rate] for Development Policy Operation of the World Bank because of the absence of ECF.

“These are legacy issues which the current government is resolving with the IMF before the proposal for the new ECF Programme is presented to the IMF Board,” he said.

On the huge debt stock, he said the government was restricting borrowing to concessional terms for key infrastructure projects and engaging development partners for extension of grace periods on loans that are not yet effective and implementing a policy of borrowing for productive investments only.

He said, to address the issue of misreporting, the government would conduct a special audit of foreign exchange reserves of RBM.

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