Malawi commits to IMF Extended Credit Facility programme

By Mike Van Kamande in Marrakech, Morocco

Marrakech, October 12: Government has assured the United Kingdom (UK) it will stick to the International Monetary Fund (IMF) Staff-Level Agreement on the Second Review of the Staff Monitored Programme and an Extended Credit Facility arrangement reached recently.

The assurance was made by newly appointed Minister of Finance Simplex Chithyola-Banda on the sidelines of the ongoing IMF/World Bank Group meeting in Marrakesh Morocco on Tuesday when he met with Second Permanent Under-Secretary at the UK Foreign Commonwealth and Development Office (FCDO), Nick Dyer.

Chithyola-Banda said the ECF will open more opportunities for Malawi hence government will introduce reforms in agriculture that includes Affordable Input Programme (AIP) and dealing with Forex Exchange realignments among others.

“We are running a crippled economy where the reserves are depleted and get assurance Lilongwe is committed to implementing reforms and keeping the programme on track. Government is stepping up efforts to meet fiscal targets under the PMB, adjusting expenditure to offset a shortfall in revenue and containing borrowing.

“Tough measures such as tightening monetary policy to contain inflationary pressures and foreign exchange auctions will have to be pursued. The rebuilding of foreign reserves has been slow as access to trade credit remains limited but government will negotiate with commercial and official bilateral creditors on commercial debts,” he said.

Chithyola-Banda further said tough measures such as debt management aimed at achieving a debt-stabilizing primary balance in the medium-term through a package of expenditure adjustment and revenue mobilization measures will be strictly followed.

In his remarks Dyer said UK was happy that change in leadership at ministry level has enhanced confidence and optimism with renewed commitment to continuing discussions aimed at finalizing the ECF Programme.

“We would like to see Lilongwe sticking to the ECF Programme which the Executive Board is scheduled to consider mid-November 2023. IMF Programmes are difficult to keep in track and the Board will need assurances that Malawi will stick to it’s obligations committing to applying fiscal discipline, containing domestic borrowing and improving public financial management,” Dyer said.

Chithyola-Banda then assured UK of government’s high level engagements in getting assurance letters from China and India and other Malawi’s partners and creditors as part of the submission.

The Global Sovereign Advisory (GSA) to Malawi, Sophie Borra, said the objective of the meeting was to provide an update on where Malawi is in terms of progressing towards the ECF, debt restructuring and to express the Government’s continued commitment to policy implementation and that it doesn’t backtrack on reforms.

The IMF team reached a staff-level agreement on the Second (and last) Review of Malawi’s Staff Monitored Programme to be supported by an ECF arrangement with access arrangement of up to US$174million.