The International Monetary Fund (IMF) will increase loans to Malawi by $76.8 million, the global lender said on Monday following an economic review of the drought-hit country.
The IMF Executive Board has completed Malawi’s Extended Credit Facility (ECF) arrangement, signed in 2012, by another six months with funding equivalent to $49.2 million.
“In completing the reviews, the Board also approved the authorities’ request for an extension of the current ECF arrangement to end December 20162 and an augmentation of access by about US$ 49.2 million or 25 percent of quota, ”reads the statement in part.
“Malawi’s macroeconomic situation remains difficult, reflecting weather-related shocks and past policy slippages, which contributed to persistently high inflation,” said IMF Deputy Managing Director Min Zhu in a statement issued in Washington after a meeting of the fund’s executive board.
The requested extension would give Malawi government authorities more time to achieve the original objectives of the program while the additional financing will help to strengthen the country’s response to the El Niño induced drought which has caused a humanitarian crisis.
The Board also approved the authorities’ request for waivers of non-observance of performance criteria related to net domestic borrowing by the government and net international reserves.
More than half of Malawi’s population is in need of food aid, the country’s minister of agriculture said last month. An El Nino-induced drought has ravaged crops, triggering a sharp rise in food prices as reliance on imports increased.
Economic growth in Malawi slowed to 3 percent in 2015 from 6.2 percent the previous year as the drought, the worst in decades, swept through the region and hurt the country’s agricultural sector in particular.
The IMF said the additional funds were granted based on Malawi’s commitment to step up structural reforms and continued spending restraint by the government.
“Accelerating the implementation of public financial management reforms is indispensable to building trust and confidence in the budget process and ensuring control over fiscal operations,” Zhu said.
He said given recent weather-related shocks and the prevalence of credit concentration risks, Malawi government authorities “are encouraged to consider additional measures, including higher capital requirements, improved credit assessments, higher provisioning, and bank mergers to mitigate risks.”Follow and Subscribe Nyasa TV :