IMF advises Malawi to live austerity: Say macro-economic policy reforms yielding results

The International Monetary Fund (IMF has said that Malawian macro-economic policy reforms have started yielding positive results but asked government to keep its spending within available resources.

IMF Mission Chief for Malawi Tsidi Tsikata issued the advice at a news conference in Lilongwe on Tuesday at the end of the two-week review of the Malawi’s Extended Credit Facility (ECF) arrangement which will enable Malawi to receive a disbursement of $20 million from IMF.

Tsikata said that team met with President Joyce Banda, heads of financial institutions, civil society organisations, trade unions and private sector operators during the mission.

“A number of indicators suggest that macro-economic policy reforms in Malawi have started bearing fruit.

Minister of Finance Lipenga , Tsikata, IMF resident rep for Malawi Ruby Randall during the news conference
Minister of Finance Lipenga , Tsikata, IMF resident rep for Malawi Ruby Randall during the news conference

“This include, increased availability of foreign exchange, the recent appreciation of the currency (Kwacha), declining inflation, and rising capacity utilisation in the manufacturing sector,’’ he said.

He said that Malawi’s performance under the ECF-support programme was `broadly satisfactory’, saying: “ nearly all the quantitative targets to the end of March 2013 were met.’’

“After adjusting for shortfalls in the disbursement of aid flows, the targets on net international reserves, government net domestic borrowing, and the net domestic assets of the RBM were met,’’ he said.

Tsikata further said that there was progress in the implementation of structural benchmarks, though at a pace slower than was programmed.

He said that discussion with Malawian economic stakeholders focused on risks to the economic outlook and measures to mitigate them.

The IMF official said the mission highlighted the need for fiscal discipline to consolidate emerging gains from the ongoing policy reforms in view of Malawi’s past record of loose fiscal policies in election years.

“ The authorities should keep government spending within available resources, ensure wage restraint, better enforcement of announced expenditure control measure and identify lower priority expenditures.

“They should also adhere to regulations governing the procurement of goods and services using purchase orders generated through the Integrated Financial Management Information System,’’ he said.

He said that the mission commended the authorities on efforts underway to reduce the cost of doing business in Malawi, the passage of a number of laws as well as regulatory and administrative reforms.

Tsikata urged the authorities should step up efforts to develop the Malawi Investment and Trade Centre into an effective `One-Stop Shop’ for investors.

He however urged authorities to keep government spending within available resources, and recommended wage restraint, the identification of lower priority expenditures that can be postponed in the event of funding gaps.

Finance Minister Ken Lipenga welcomed the advice, saying the Banda administration is “listening.”

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