Reforms by President Joyce Banda are paying for Malawi as International Monetary Fund (IMF) announced on Monday that it has approved a new three-year $156.2 million loan arrangement under the Extended Credit Facility (ECF) to address chronic balance of payments problems, improve the outlook for poverty reduction and boost growth.
In a media statement made available to Nyasa Times, the global lender said it would immediately disburse $19.5 million to the Banda government.
The IMF said Banda’s government had moved swiftly to devalue the kwacha. But the devaluation has pushed prices of goods up and saw the rising inflation from single digit to around 17.3 by May.
The Fund said the new loan provides support for economic program based on Malawi’s second Growth and Development Strategy (MGDS II).
“Specific objectives of the program include macroeconomic stability with low inflation, increasing international reserves to provide a buffer against external shocks, and reforms to improve the investment climate and promote sustained inclusive growth,” reads the statement issued by Naoyuki Shinohara, Deputy Managing Director and Acting Chair of IMF Executive Board.
IMF also lauded the Banda government for adopting “a prudent fiscal stance” in the 2012/13 national budget.
It said higher donor support and a sizeable domestic revenue effort allow the government to increase total spending slightly without recourse to domestic borrowing.
“Tight control over non-priority spending will be needed to ensure that expenditures are aligned with the government’s priorities, including scaled up spending on social protection programs to mitigate the impact of adjustment measures on the poor,” reads the statement.
IMF said the monetary policy will be geared to achieving price stability, while providing room for sufficient credit to the private sector and supporting a build-up of international reserves.
Reforms, according to the statement, will include measures to increase the operational independence of the Reserve Bank of Malawi (RBM) to enable it pursue the objective of achieving low inflation and building up international reserves from current very low levels.
Malawi faced serious macroeconomic challenges in the last two years under the late president Bingu wa Mutharika, including a severe shortage of foreign exchange, which translated into shortages of critical imports such as fuel, inputs for production, and medicines.
But President Banda who ascended to power on April 7 following the death of Mutharika, quickly moved into reform and addressing concerns that saw the economy to be strangulated.Follow and Subscribe Nyasa TV :