Minister of Finance, Sosten Gwengwe, has warned that things may get worse before they become better as authorities lay a solid foundation for sustainable macroeconomic policies that last.
Gwengwe was speaking in Lilongwe ahead of the IMF Mission visit to Malawi for Extended Credit Facility negotiations.
He said government cannot fix the broken economy by avoiding the difficult, painful and bold decisive decisions, no matter how unpopular they may seem in the immediate term.
Gwengwe said now is the time for Malawi to walk on a tough path, no matter how difficult the terrain might be.
“We will not cut corners. We will not sugarcoat. We will not misreport.
“We need to be more focused to the economics and not the politics for these reforms to yield the much-needed results. A better economy is good for us all regardless of our affiliations; political, religion or ethnic,” Gwengwe said.
He said the overall goal is to put the economy on a more solid foundation which is more resilient to external shocks the global economy is experiencing now.
He said the fiscal authorities will soon be announcing a cocktail of cost cutting measures that will be implemented.
On forex, Gwengwe said the priority is that the Reserve Bank of Malawi should start building its own adequate properly defined National International Reserves.
“Between 2017 and 2020 we were overexposed to roll over currency swaps. In June 2020 rolling was not possible because we had to pay $350 million upfront and the country did not have such resources.
“It is therefore important to have in place policies that ensure that RBM builds its own reserves,” Gwengwe said.
He observed that the Central Bank is also considering other measures to safeguard the forex that the country is generating from tobacco and other exports.
The IMF Mission team is expected in the country on May 25 and will be holding talks with authorities for about two to three weeks.
Gwengwe said Malawi Government has been holding discussions with the IMF over the past weeks and that the mission is coming for negotiations on the ECF programme.
On Thursday, economic commentators said much as securing an IMF programme could be crucial for Malawi, the country would have to do more to end the economic challenges that have riddled the nation in recent years.
Economics Association of Malawi Executive Director, Frank Chikuta, said the ECF is not a development facility, adding that there are other institutions which provide support in the development arena.
According to Chikuta, for Malawi to address the chronic foreign exchange challenges, it needs to address the structural challenges in the economy to make it export led.