IMF gives Malawi flicker of hope to resume lending

The International Monetray Fund (IMF) says it  will consider to resume extended credit facility (ECF) to Malawi in the 6th scheme after the end of mission to Malawi.

Addressing a news conference in Lilongwe on Thursday, 18 December, 2014, the IMF representative in the country ,Oral Williams who was accompanied by  the Minister of Finance, Goodal Gondwe, said  the global lender’s mission and the Malawian authorities reached staff-level agreement on policies that could be supported under the ECF and the country would receive about US$20 million.

Williams said  policies geared toward bringing inflation down to single digits and increasing reserve coverage over the duration of the program were central to discussions with government.

“These encompassed measures to strengthen budget execution—key to ensuring delivery of its objectives—including safeguarding social spending, while maintaining a tight monetary stance to bring inflation to a downward trend,” he said.

IMF mission leader said the discussions also  focused on incorporating the recommendations of an IMF technical assistance mission on public financial management into the program.

“These recommendations are aimed at restoring financial controls and accountability in the face of the ‘Cashgate’ scandal,” said Williams.

“Addressing vulnerabilities in the financial sector that may have emerged in light of recent shocks faced by the economy were central to program discussions and included measures to strengthen the legal and regulatory frameworks to address sector-wide issues,” he added

Williams said for Malawi to receive support for EFC. he staff-level agreement is subject to review by the IMF’s management and its Executive Board in Washington. Consideration by the Executive Board is expected in early 2015.

The mission held discussions with President Peter Mutharika, Finance Minister Goodall Gondwe, Reserve Bank of Malawi (RBM) Governor Charles Chuka, Secretary to the Treasury Ronald Mangani, other senior government and RBM officials as well as representatives of Malawi’s development partners.

“The mission expresses its gratitude for the constructive spirit in which discussions were held,” said Williams.

Gondwe said IMF were impressed woith the good economic initiatives that the Mutharika government has undertaken since May.

International donors withheld aid after more than $40 million in government funds went missing between April and September last year in a scandal known as cashgate.

Meanwhile, Malawi’s government reforms programme has started   scrutinizing its public services to identify posts that can be eliminated to save money in the African nation that relies on aid for 40 percent of its budget.

“We must begin now to transform our public service into a service that is answerable and accountable to the people of Malawi,” vice president Saulos Chilima said on Thursday, adding: “This government will maintain an absolute zero-tolerance policy on corruption, graft, bribery and theft in government.”

Malawi has trimmed its cabinet to 20 from 36 to save about $40 million over the next five years, said Chilima, who si also chairman of the Public Service Reform Commission.

The cuts are part of efforts to meet economic growth that at least matches the 6.1 percent forecast by the government for this year, Chilima said .

The ECF is the IMF’s main tool for medium-term financial support to low-income countries. It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years.