The International Monetary Fund (IMF) has approved $18.1 million (almost MK7. 6billion) for Malawi under its three-year Extended Credit Facility (ECF) support program.
The approval of the funds by the IMF board at a meeting in Washington on Monday means that Malawi so far has a total disbursement under the ECF program to US$ 90.3 million out of the program’s total resources of $156.2 million (about K55 billion).
According to a statement from the Bretton Woods institution the approval esult from the completion of the fifth and sixth review of Malawi’s economic performance by the IMF board under the new ECF program.
In completing the fifth and sixth reviews, the IMF Executive Board also approved the authorities’ request for waivers of non-observance of performance criteria related to the net domestic assets of the Reserve Bank of Malawi (RBM), net domestic borrowing by the government, the ceiling on new non-concessional external debt maturing in more than one year, and the ceiling on non-accumulation of external payments arrears.
The Board also approved a request for an extension of the current ECF arrangement by six months to May 22, 2016 and the rephasing of disbursements associated with the seventh and eighth reviews, the statement said.
“Malawi’s macroeconomic outlook and performance under the IMF-supported program was significantly damaged by a large-scale theft of public funds [cashgate] and by policy lapses in the run- up to elections. The breach of governance resulted in the suspension of budget support from donors, which has led to increased recourse to central bank financing, accumulation of domestic arrears, exchange rate depreciation, and high inflation,” pointed out Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director.
The IMF boss expressed confidence in the Peter Mutharika government that it is committed to rebuilding trust in public institutions and bringing the IMF-supported program back on track, including through maintaining a flexible exchange rate regime and the automatic fuel pricing mechanism.
“Bringing inflation down to single digits and boosting official foreign exchange reserves remain key policy objectives,” Furusawa states.
The IMF boss stressed that addressing weaknesses in public financial management is necessary to restore donor confidence and foster donor re-engagement.
“The authorities’ steadfast implementation of a comprehensive strategy in this area remains an urgent policy priority,” he added.
IMF noted that the Reserve Bank of Malawi is committed to tightening monetary policy as needed to keep inflation on a downward path.
It noted that measures taken in late 2014 have already helped reduce liquidity and stabilize the currency. Steps underway to curb deficit financing by the central bank should enhance the credibility of monetary policy.
Malawi Finance Minister Goodall Gondwe has since said the IMF’s disbursement is a “refreshning news” for the country.Follow and Subscribe Nyasa TV :