Malawi government has failed the International Monetary Fund (IMF) yard stick of Extended Credit Facility (ECF) worth US$150 million. According to the assessment Malawi is off-track after the country’s failure to meet set targets ending June, 2015 attributed to high expenditures.
This comes on the heels of the social-economic turmoil the nation is currently experiencing with extravagancy on the part of the executive arm of government recently being the large entourage escorting President Peter Mutharika to United Nation General Assembly in New York as tax-payers money is being spent while hospitals have insufficient drugs and medical equipment.
Addressing the new conference on Wednesday, September 30 in the capital Lilongwe jointly held by The IMF Mission Chief for Malawi, Oral Williams and Minister of Finance Goodall Gondwe, the mission proposed measures to Malawi government to review the ECF program including revision of the 2015/2016 National Budget passed in June 2015.
The IMF was in the country from September 16-30 aimed at conducting the assessment on how the country was fairing in line with the 2015 Article IV consultation and discus progress under the ECF which was approved in July 2012 as the main tool for medium-term financial support to low-income countries including Malawi.
“The ECF is off-truck and we have discussed a number of measures to bring back the program starting with the revision of the national budget. Malawi’s economy is facing challenge due to shocks. You had floods, more teachers were employed and revenue collection shortfalls.
“Fiscal slippages equivalent to about two percent of GDP emerged during the second half of the 2014/2015 fiscal year, in part because of overspending on the wage bill and these were exacerbated by revenue and external financing shortfalls. Real projection of GDP growth for 2015 has fallen to 3 percent from earlier 5.5, percent, reflecting a steep decline in the maize harvest with additional of weak private sector investment and consumption. ”, observed IMF Mission Chief William.
William added that corrective measures undertaken to offset the slippages were insufficient whose result, end of June 2015 programme target on net domestic financing was not met.
“On the structural reforms in the financial sector were carried out of as planned, but the programmed improvements in Public Financial Management (PFM) were delayed.
“To this end, tight monetary and fiscal policies are needed. Given on going external financing shortfalls, the budget should be financed in a suitable manner and expenditures prioritized with the view to safeguard social spending.
“Therefore, restoring microeconomic stability by bringing inflation rate down to single digits remains the key precondition to fostering and sustaining growth in the near future to medium term. The mission will be back in Malawi this coming December, 2015 to evaluate targets and decide the way forward for the consideration of the 2015 Article 4”, says William.
In his reaction to the assessment Finance Minister Gondwe welcomed the recommendation saying the government will consider travel budget revision to a lower side during the 2015/2016 Mid-year Budget Review in Parliament slated for February 2016.
Thus, with the declaration of the country’s IMF ECF Programme off-truck, it means that the second tranche of funding worthy US$20 million will not be disbursed to Malawi until the mission second visit in December 2015.
This the second time The International Monetary Fund (IMF) declared its Extended Credit Facility (ECF) off-track as similar announcement in 2011 under the late President Bingu WA Mutharika.
