IMF approves US$20m loan to Malawi: Completes first review
The International Monetary Fund (IMF) has approved $20 million (almost MK7 billion) for Malawi under its three-year Extended Credit Facility (ECF) support program.
The approval of the funds means that Malawi so far has a total disbursement under the ECF program to $40.1 million (almost MK14 billion) 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 result from the completion of the first review of Malawi’s economic performance by the IMF board under the new ECF program which was approved on July 23, 2012.
IMF Deputy Managing Director and Acting Chair Naoyuki Shinohara said observed that despite drought in parts of Malawi that has lowered overall growth in 2012, and threatened the subsistence of nearly 2 million people, the southern African country’s performance under the
ECF has been satisfactory.
He said a spike in food prices and the continuing depreciation of the kwacha contributed to a surge in inflation, which stands at 30.6 percent as of end October, 2012.
“The external economic environment has also been more difficult than anticipated,” Shinohara said.
Malawi is projected to grow by 1.9 percent from the earlier 4.3 percent as forecast by the IMF.
Shinohara said Malawi needs tight monetary and fiscal policies to stabilize the exchange rate and mitigate the run-away inflation.
He also observed that fiscal policy, including the reactivation of the automatic adjustment mechanism for fuel prices which he said has cut untargeted subsidies that mainly benefit the ‘better off’ is also playing a role.
“The RBM has stepped up its oversight of banks with a view to addressing emerging threats to the stability of the financial system. It is paying particular attention to ensuring that banks facing persistent liquidity problems implement restructuring plans that put them back on a sound financial footing,” he said.
The IMF has also hailed Malawi for committing itself to removing regulatory restrictions to improve the investment climate and foster sustained and broad based growth.
Shinohara also said that the bulk of the additional external financing provided by Malawi’s donors will allow the government to increase outlays on social protection programs without increasing domestic borrowing.
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