Mutharika hopes IMF agreement by Nov: ‘Malawi will protect Kwacha’
President Peter Mutharika has told US based financial and business news agency Bloomberg that his administration expect to reach an agreement with International Monetary Fund (IMF) as the government struggles to pay its bills after donors cut aid.
“We’ll obviously need the IMF,” Mutharika told Bloomberg in an interview in Washington at the U.S.-Africa Leaders Summit.
According to the report, Mutharika doesn’t expect donors who have in the past financed 40 percent of the country’s budget to resume aid this year after financial plunder in the public purse.
“The conditions have never been clear,” he said. “They say that when they are satisfied that there is prudent financial management they’ll resume the aid, so that’s very broad. I am sure they will do it fairly,” Bloomberg quoted Mutharika, who was elected in May disputed elections.
He said Malawi may seek a loan from IMF at a later stage.
Mutharika, 74, said his administration has cut expenditure and aims to boost tax collection.
At the same time, the government is committed to cement, seed and fertilizer subsidies, which the president promised in the election campaign.
“It’s socially responsible to assist people who cannot afford things,” he said. “We are committed to subsidies.”
Mutharika, who was in Washington along with more than 40 African heads of state to attend the three-day U.S.-Africa summit also said his government will protect the Kwacha from devaluation.
“We’ll try to protect the kwacha, I guess we have no choice,” he said. An intervention would depend on “conditions,” the Malawi leader added.
Malawi’s currency has declined 16 percent against the dollar since the end of 2012 and the central bank last month cut the key interest rate by 2.5 percentage points to 22.5 percent.
The currency fell less than 0.1 percent to 396.74 to the dollar as of 3:47 p.m. in Malawi.
Mutharika, said his hopes Reserve Bank of Malawi will cut the rate further within six months.
According to Bloomberg, Mutharika pointed out that Malawi economy has improved and is currently growing at a rate of 4 percent to 5 percent this year but noted that the burley tobacco crop, Malawi’s main export, isn’t “very good.”
“We hope that in the end it’ll be fine,” he said. “We’ve turned around the corner, probably not completely.”
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