Malawi misses IMF target on government social spending

Malawi has failed to meet International Monetary Fund (IMF) set targets on social spending by small margin, the global leader said on Tuesday.

The IMF’s mission head for Malawi, Tsidi Tsikata, told a news conference in the capital Lilongwe the Fund’s mission which was in the country blamed the Malawi government for failing to meet agreed targets on social spending.

“The indicative targets on reserve money and on government social spending were missed by small margins,” said Tsikata.

He said the targets were missed during the second quarter ending December 31 under the country’s programme with IMF.

Tsikati: Missed by small margins
Tsikati: Missed by small margins

“The authorities indicated that after a delay, social protection programs have been successfully scaled up.”

The IMF team was in the country for discussions on second review of Malawi’s ECF arrangement and while in the country the mission held meetings with international development partners, the private sector and other key ministries, departments and civil society organizations.

IMF said the mission had reached staff-level understanding with the authorities on policies for completing the second ECF review.

“Consideration by the IMF’s Executive Board is tentatively scheduled for late March and completion of this review will enable Malawi to receive a disbursement of SDR 13 million (about US$20 million) from the IMF,” said Tsikati.

Malawi has been beset with economic problems since the IMF sharply curtailed lending facilities last year.

Former leader Bingu wa Mutharika, who died in office in April, was widely criticised for a poor human rights record and mismanaging the economy.

His successor, President Joyce Banda, has taken steps to appease donors with a series of reforms.

Banda’s reforms have been slowed by the kwacha currency’s persistent weakness and by troubles in implementing social reforms.

In June 2012, the IMF and Malawi agreed to a 3-year, $157 million package to support the economy.

In November, the IMF cut its growth forecast for Malawi for 2012 to 1.9 percent from 4.3 percent, citing a slowdown in manufacturing and agriculture. Tobacco earnings have fallen from $416 million in 2010 to $177 million in 2012.

IMF  observed the growing public outcry over falling living standards and perceived wasteful spending and fraudulent activities in government sector; and strikes by civil servants and other workers demanding higher wages.

“Against that backdrop, the mission discussed with the authorities their policy intentions with respect to addressing growing pressures on the budget,” said IMF, adding “It also discussed the scope for policy actions to stabilize the exchange rate and lower inflation.”

The mission further recommended a tightening of expenditure controls and identification of lower priority activities that can be cut or postponed to make room for higher priorities.

Malawi is one of the poorest countries in the world and aid has been used to make up a large proportion of the national budget.

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