LILONGWE-(MaraviPost)-The International Monetary Fund (IMF) this week approved US$26 million credit facility, following Malawi’s performance on its Extended Credit Facility (ECF).
The IMF approval to disburse US$26.9 million (MK19 billion) to Malawi falls under the ECF to stabilize foreign exchange rates.
This a recipe for development partners to start releasing funds for direct fiscal year plan support, and good news for Malawi, which on Thursday approved its 2017/18 national budget.
Malawi’s IMF representative Jack Ree, told the Nation newspaper with the situation as it is, there was the possibility that donors might unlock direct support to the Malawi Government.
Ree however, cautioned that donors’ response will depend on the country’s authority to build on the gains achieved during the ECF program in public finance management.
He stressed for the need to fix the plumbing in the management of public funds and keep on freeing up of its fiscal space to reduce aid dependency.
Ree observed that following the IMF Executive board’s endorsement, both the private sector and donors will feel more assured that Malawi’s economy is on the right track, and on the verge of coming out of the woods.
“We first need to make sure that the fixed pipes do not break again. We then need to shift the repair works to more complicated sources of leaks, for example the management of procurement. One low hanging fruit is interest payments on public debt, which takes up an alarming 16% of the budget. The cost will be reduced drastically to bring inflation down, which will make interest rates to follow suit.
“Stronger accountability framework for public investment is another one which will ensure that every tambala spent brings home the intended value. Donors will therefore, feel more confident about the authorities’ commitment for continued reforms and at bringing the economy back on track,” said Ree.
Reacting to the development, Ben Botolo, Secretary to the Treasury Dept., while lauding the IMF decision, he was quick to say the Malawi Government is focusing on balancing the microeconomic stability and public finance management reforms.
Botolo added that Malawi is considering negotiating another program going forward m; this is slated for July and September this year.
The Credit facility aims at achieving and maintaining macroeconomic stability and implementation of policies and structural reforms, that is meant to spur growth, diversify the economy and reduce poverty.
The ECF arrangement for Malawi worth US$143.5 million, was once approved on July 2012. But in 2016 the IMF board released US$47.8 million to strengthen the country’s response to El Nino-induced drought.