Malawi on track for extended credit facility

IMF says Malawi is on track for extended credit facility (ECF) arrangement following extensive discussions with the Chakwera government over the couple of months.

In a statement issued from Washington today, IMF says an International Monetary Fund (IMF) team led by Mika Saito held discussions during May 25-June 3, 2022, via hybrid and in-person meetings in Lilongwe on the authorities’ Request for a Four-Year Extended Credit Facility (ECF) Arrangement.

IMF says the Chakwera administration has requested an arrangement in the back of the protracted balance of payments problem.

“While IMF support and its catalytic role in mobilizing donor support are critical at this juncture, being able to restore debt sustainability and resolving the misreporting case are pre-requisites for such support,” says the IMF.

The statement says while the authorities are addressing these issues, the IMF team conducted a mission to agree on macroeconomic framework, policies, and reforms.

“We had positive and productive discussions with the authorities on the current macroeconomic conditions and policies to steer the country towards macroeconomic stability and a sustainable debt path.

“We welcome the authorities’ recent steps to normalize the forex market in line with the recommendations of Article IV Consultation concluded by the IMF Executive Board in December 2021 to help to improve foreign exchange availability,” says Saito in the statement.

The statement says special audit of the official foreign exchange reserves of the Reserve Bank of Malawi (RBM) is now in the final stages.

This report will form the basis for consideration of the pending misreporting of RBM Foreign Exchange Reserves by the Executive Board of the IMF, says the statement.

“The authorities have engaged a debt advisor to support their efforts in addressing Malawi’s unsustainable public debt.

“As this work progresses, the discussions with the authorities will resume towards a staff-level agreement,” says the statement.

The statement says that the IMF staff held meetings with Minister of Finance and Economic Affairs Sosten Gwengwe, Reserve Bank of Malawi Governor Wilson Banda, and senior government and Reserve Bank of Malawi officials, and the private sector.

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