IMF says Malawi economy in ‘lean season’: To consider unlocking credit facility in 2015
As the economic woes continues biting Malawians, the International Monetary Fund (IMF) which froze its Extended Credit Facility (ECF) to Malawi due to cashgate scandal says it will consider to submit the country’s request to complete the fifth and sixth reviews under the ECF-supported program during its board meeting early 2015, dashing hopes of possible donor-fund return to Malawi anytime soon.
The IMF said this on Tuesday after the completion of a two-week visit in Malawi by its team of experts which was led by IMF’s Oral Williams, which was aimed to conduct discussions for ECF arrangement.
The mission held discussions with Finance Minister Goodall Gondwe, Reserve Bank of Malawi (RBM) Governor Charles Chuka, Secretary to the Treasury Ronald Mangani, other senior government and RBM officials, a broad range of national stakeholders outside government, as well as representatives of Malawi’s development partners.
In a statement issued at the end of the mission Williams said preliminary indications are that economic activity has demonstrated considerable resilience with real Gross Domestic Product (GDP) growth for 2014 is projected between 5 and 6 percent, with contributions from the agriculture and retail trade sectors.
He however says inflation remains high, in part because of uncertainties about the resumption of budget support.
“Policy implementation continues to take place under difficult circumstances. Shortfalls in budget support due to the cashgate scandal have led to challenges in the execution of the previous and current year’s budget, with increased recourse to costly domestic financing and the accumulation of significant domestic debt.
“At the same time, the exchange rate has weakened considerably, exacerbating inflationary pressures. The depreciation is in part seasonal, as the economy has entered the ‘lean season’ where export-related foreign exchange receipts are low. However, this has been compounded by ongoing shortfalls in budget support.”
According to Williams the discussions focused on the policies necessary to return the economy to a strong, noninflationary, and inclusive-growth trajectory.
“Significant agreement has been reached in a number of important areas. These include on fiscal policy, where the authorities intend to follow a restrained stance, and on monetary policy, which will remain tight until inflation returns to a clear, declining trend,” he says.
The mission has emphasized on the need for Malawi government to exercise greater control over spending commitments in line with available financing to avoid the accumulation of additional debt.
It also has noted that containing spending within approved ceilings would allow fiscal policy to be supportive of monetary policy and mitigate the impact of inflation on the most vulnerable segments of the population.
The mission noted, however, that despite a favourable outlook for international food and fuel products, the policy actions required to bring inflation to single digits would likely entail some slowing of economic growth in 2015.
“The Malawi authorities reiterate their commitment to strengthen public financial management systems and to be guided by the gaps identified in the recently released forensic audit report,” reads the statement.
The mission views implementation of meaningful reform in this area to be crucial in supporting the macroeconomic policy stance and boosting private sector confidence.
“This will in turn help catalyze investment required for strong growth over the medium term.”
Discussions with donors emphasized that vigorous implementation of reforms in this area would be a precondition for a resumption of budget support.
“The mission will continue to work with the authorities in addressing these challenges in the weeks ahead. Assuming a successful resolution of remaining issues, it is anticipated that a request to complete the Fifth and Sixth reviews under the ECF-supported program could be submitted for consideration by the IMF’s Executive Board in early 2015.”
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‘unlocking credit facility’? my foot. for whose benefit. Katapila weniweni institutionalized at international level to benefit only the rich who control the world riches. Any wonder why banks are the most profitable institutions in Malawi? the rich get richer at the expense of the poor masses. modern day slavery in black and white. Let us try to quench this appetite of luxury borrowing (a malopa ndi awa akuzunzika ndi bank apawa. Issues which are supposed to be secret between him and the bank is now being discussed on nyasatimes forum) and work hard to sustain our lives. give up luxuries… Read more »
issues of economy are very complex and not easy to be understood by babies and norrow minded pple those with knowledge of economy find opportunities to increase thier income at thier household while narrow minded insart those in authority and do nothing different than ussual to change thier income levels. Sorry for that. Gondwe be at rebarty restructure the economy please it will be well with malawians
A President samabvutika ngakhale munyoze chotani iwo zawo zikuyenda iwe ndi ine tizingolira mpaka 2019 woooooooooooo! Ngakhale muziti asathandize President sagona ndi njala ayi!
You ain’t seen nothing yet.
The President should make a statement on the national economy. Are some of the boards to where the new appointees have been made really necessary? I believe the issues can be handled by the appropriate ministries. We can not drain resources even further just for the sake of silencing the critics. After all their criticisms are good for the nation. Were the activists criticizing for personal recognition and eventual benefits. I wonder how easily they have been roped=in. I cry for my nation, where shall we get patriotic leaders?
My friend don’t just comment for the sake of commenting or because you hate the current government. Governance dictates that institutions operate with the non executive board in place otherwise some crucial decisions will be deemed illegal if made without the board. It’s how the law is. Mind you the costs incurred by the board are minimal. The problems we are facing cannot be solved by government alone. These problems need the private sector to produce enough and export so as to earn enough forex. As individuals you have to work hard to produce enough for yourselves, your families then… Read more »
Now it is a shame to disclose that you are from Malawi. Our economy is worse than our neighbouring countries. Poor management and thefty.
The IMF Cheif is of african origin, but does he love malawi, i have never seen him being favourable to malawi, always no aid, have some mercy on poor malawians
PLEASE SUBMIT IN 2019. 2015 IS TOO NEAR TO CONCLUDE THE 92 BILLION CASE.
This is good government officials should learn how to use Money wisely. Donors should not just donate unnecessarily they want to know where the donation is going.
mr ibu our very own learned prof asova apo bii cardiac arrest is waiting