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Time running out on IMF ECF

No staff-level agreement on cards

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SOSTEN GWENGWE

Time is fast running out for Malawi on the country’s desire to have a staff-level agreement with the International Monetary Fund (IMF) on the new Extended Credit Facility (ECF) programme ahead of the fund’s Executive Board Meeting slated for July 18.

With only seven days to go before the IMF Executive Board Meeting, there is still no white smoke from the negotiation room between Malawi and the IMF Mission team on the new programme.

This is despite that Malawi and the team agreed on the macroeconomic framework, negotiations. which is considered key in the

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Sources at the Bretton Woods institution told The Daily Times last week that failure to secure a Staff Level Agreement in time would push the IMF Executive Board Meeting for Malawi to September.

IMF Mission Chief for Malawi Mika Saito could not respond to The Daily Times’ questionnaire on the possibility of sealing a Staff Level Agreement between now and July 18.

But, in a written response on Wednesday, IMF Country Representative for Malawi Farai Gwenhamo said the engagement is ongoing.

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“At this stage, the update I have is that discussions are still on-going,” Gwenhamo said.

When contacted on Saturday, Finance Minister Sosten Gwengwe said the government would inform the citizenry about going-on.

“There will be a public update in good time,” he said.

During an IMF Mission engagement with Malawi last month, the fund insisted on two critical documents, a debt management plan and a Special Reserve Bank of Malawi Foreign Exchange Misreporting Audit Report before they could reach an agreement on the new four-year ECF programme.

“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 adviser 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,” Saito said at an end-of-mission statement.

RBM Governor Wilson Banda recently said Malawi desperately needs an ECF programme with the IMF.

“I think we need a break, we need to make sure that we have the programme with the fund and we start engaging with donors. We need to show our visibility out there and start addressing issues that affect the average man and woman in Malawi,” Banda said.

According to Banda, a programme with the IMF gives a stump of approval that the country has the right macroeconomic policy mix and a sound fiscal framework.

“In the absence of donor support, the government ends up having to foot that bill [budget deficit] and that can be very taxing. This is why you find that, in the past three to four years, there has been a lot of borrowing by the government from the domestic market that has led to the crowding out of the private sector.

“We want the private sector to take centre-stage [so that] the gap in the government budget will have to be filled by donors and they can only do that with a programme with the IMF. So, we think the programme with the IMF is necessary,” he said.

Malawi’s last programme with the IMF was cancelled in mid-2020 soon after the Tonse Alliance administration came to power in June 2020.

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