By Wezzie Gausi:
The Reserve Bank of Malawi (RBM) has said since Malawi joined the International Monetary Fund (IMF) in 1965, Special Drawing Rights (SDRs) allocated to the country have amounted to SDR199.4 million, which is equivalent to $265.3 million (about K266 billion).
An SDR allocation is a way of supplementing IMF member countries’ foreign exchange reserves, allowing members to reduce their reliance on more expensive domestic or external debt for building reserves.
In an interview, RBM spokesperson Mark Lungu said the last General SDR Allocation was made on August 23 2021 to help IMF member countries deal with the negative impacts of Covid on international trade.
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He said Malawi was allocated SDR133.0 million, which was equivalent to $190.0 million (about K190 billion).
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“The SDRs help the country to build its foreign reserve assets. The country continues to struggle to accumulate reserves due to the mismatch between demand and supply of foreign exchange.
“The allocation of SDRs by the IMF helps to fill this gap, albeit temporarily. For instance, when the country received the SDR133.0 million in 2021, this assisted [it] to deal with the pressure on foreign exchange demand,” Lungu said.
Meanwhile, Malawi University of Business and Applied Sciences-based economist Betchani Tchereni has said the role of IMF is to help developing countries achieve macroeconomic stability.
He said it does so using a number of tools such as credit facilities and other programmes.
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“The IMF does issue some perpetual credit facilities which are soft in nature. Through proportional Special Drawing Rights allocations to member states, the IMF has done so for Malawi too.
“With the trade balance challenges and low foreign reserves, RBM has used SDR allocations, just like any other foreign reserves, to allocate [funds] towards the purchase of strategic commodities such as fuel and medicines,” Tchereni said.
He added that SDR allocations have had some positive impact on Malawi, just that he impact could not have been noticeable because of the wide gap between import demand and export earnings.
