IMF ready to support Malawi Extended Credit Facility programme

Deputy Managing Director for the International Monetary Fund (IMF), Tao Zhang Thursday said the fund is ready to support Malawi’s next Extended Credit Facility programme (ECF).

Speaking at Kamuzu Palace in Lilongwe after meeting President Prof Peter Mutharika, Zhang said the IMF was impressed with the efforts the Malawi government was making in implementing the Public Finance Management Reforms.

He said despite the challenges the country faced such as droughts and floods among others which affected growth of the economy, government remained focused and implemented cost-cutting measures.

Meanwhile Zhang has asked the Malawi Government to expedite preparations on the next programmes so that the board could scrutinize the proposals and make a determination.

“We aware of the expiry of the ECF programme for Malawi and as IMF, we are committed and ready to support the next programme. However the IMF board will make fresh assessment on Malawi programmes and decided the way forward,” said Zhang.

In order for the country to remain on track, the IMF boss appealed to government to maintain the economic stability, continue improving the public finance management systems and minimize social spending.

President Prof peter Mutharika assured Zhang that he was determined to ensure that the country stay the course, sustain growth, prosperity and end poverty among Malawians.

He said despite that he inherited huge debts and faced a massive withdrawal of donor aid due to the famous cash-gate, government worked very hard to improve the situation.

“At the time I took over government, Malawi was off-track the Extended Credit Facility program. Cash-gate had damaged Malawi’s macroeconomic outlook significantly; and an equivalent of four and half percent of GDP was withdrawn from our national budget.

“The suspension of donor budget support, coupled with insufficient adjustment of expenditure in line with the available resources, resulted in increased recourse to domestic financing. As a result, the targets on net domestic assets of the central bank, and net domestic financing of the central government were frequently missed,” the President said.

He further said, “Inflation has come down, from over 24.5 percent in 2014 to 14.6 percent last month; and we are aiming to have it even lower. We have also worked hard to ensure availability of food in the most difficult time and the flexible exchange rate regime and automatic fuel pricing mechanism which we implemented served our country well.

“I am pleased to also say that we are now up to date with the reconciliation of government’s main accounts. We have rationalized government bank accounts; and increased the coverage and security of the integrated financial management information system (Ifmis).”

The Malawi leader said government has also managed to publish budget execution by vote; and we strengthened treasury cash management functions and commitment controls.

Mutharika then described Zhang’s visit a sign of confidence that the IMF has in his leadership having cleaned up the financial system and that Malawi was back on track the Extended Credit Facility with the fund.

“Your coming to Malawi has raised a lot of interest among our people. In fact, many want to hear more from you, than from me. Many of them were pessimistic about Malawi’s standing before the IMF, at the time I took over government in 2014. And some, especially opposition parties do not accept that we have cleaned up the financial system and that we are back on track the Extended Credit Facility with the IMF,” he said.

Mutharika said though there were problems with programme design which affected the achievement of the macroeconomic objectives agreed with the previous government in 2012. He was optimistic to leverage on the next programme that Malawi government intend to negotiate with the Fund.

“For now, we believe we have travelled through, and are now out of the most difficult times, and we look forward to the smooth ending and conclusion of the current programme,” said the President.

Based on the current environment, Mutharika said the country’s  objectives remain to reduce inflation to single digit by mid next year and increase real GDP growth to around 7 percent, so that we can meaningfully increase the GDP per capita of Malawi.

Furthermore, the country will have a successor MGDS that will focus on fewer priority areas, namely Agriculture and Climate Change, Energy Industrial Development and Tourism, Education and Skills Development, Transport and ICT Infrastructure, Tourism, Nsanje Inland Port, and Health and Population Management.

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