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Rapid Credit Facility to bring ‘temporary relief’

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Betchani Tchereni

Economic commentators have said they expect the $54 million Malawi will earn from the International Monetary Fund (IMF) under the Rapid Credit Facility (RCF) programme to bring temporary relief to Malawians, who are facing economic challenges.

On Tuesday, the IMF nodded to Malawi’s RCF programme, allowing Malawi to access 50 percent of its quota with the Bretton Woods institution.

According to the IMF website, Malawi’s Special Drawing Rights (SDR) quota with the IMF stands at 138.8 million [SDR], which is about $108.68 million.

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Fifty percent of Malawi’s quota, therefore, translates to approximately $54.34 million, meaning that this is the amount the country would access under the Food Shock Window of RCF.

Centre for Research and Consultancy Director Milward Tobias said the amount is “relatively small” to have a significant impact on the country’s Balance of Payment (BoP) challenges.

“You know, IMF is like a Sacco [savings and cooperative society]. The more you keep, the more you can borrow from them. In this case, because our quota is small, it means we can only borrow very little to heal problems. If you look at how much we, as a country, need, it is about $250 million per month.

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“If you do your mathematics, you will see how many days that could last. But, that said, we need to thank the IMF because the money will at least help in some areas,” Tobias said.

He said Malawi still needs to do things to secure the Extended Credit Facility (ECF) programme, which has the potential to unlock massive donor support as it sends the signal that the country is doing things the right way.

On his part, Malawi University of Business and Applied Studies Associate Professor of Economics Betchani Tchereni said Malawi’s BoP challenges are huge.

“Remember that our import demand per year is to the north of $3 billion and, currently, for strategic commodities, we need as much as we can have. This amount is rather small but it should provide a relief for a few weeks or a month.

“The RCF is, by design, aimed at creating an environment necessary for a much broader facility such as the ECF, which, in turn, should enable us to get some confidence from development partners,” Tchereni said.

On Tuesday, Finance Minister Sosten Gwengwe said the government was awaiting formal approval from the IMF Board.

“We have obtained 50 percent of our IMF quota, plus we have not abstained anything. We have concluded a mission successfully and now await the board’s approval,” he said.

Malawi is still pursuing a $350 million four-year ECF programme with the IMF.

The fund remains concerned with Malawi’s public debt, currently hovering at K6.38 trillion.

RCF provides rapid concessional financial assistance to low-income countries facing an urgent balance of payments need with no ex-post conditionality where a fully-fledged economic programme is neither necessary nor feasible.

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