IMF Approves $26.9m for Malawi

By Dipo Olowookere

The International Monetary Fund (IMF) has approved the disbursement of $26.9 million for Malawi to support its economy.

The fund was released under the Extended Credit Facility (ECF) arrangement, bringing total disbursements to $191.4 million.

IMF’s ECF scheme is aimed at macroeconomic stability, growth, economic diversity and reduced poverty.

The global financial firm said Malawi’s real GDP Growth is expected to pick up in 2017 due to better prospects for agricultural output, though the macroeconomic outlook remains challenging, reflecting uncertainties related to adverse weather conditions and policy slippages.

Also, the IMF approved the Malawian authorities’ request for waivers of non-observance of performance criteria related to the net domestic assets and net international reserves of the Reserve Bank of Malawi, and net domestic borrowing by the central government.

Acting Chair and Deputy Managing Director of IMF, Mr Mitsuhiro Furusawa, stated in a statement that, “Malawi’s economy has been severely hit by two consecutive years of weather-related shocks, which placed an estimated 40 percent of the population at risk of food insecurity. Relief efforts helped stabilize maize prices and alleviate the adverse impact of the drought on the vulnerable population. Augmentation of access under the ECF arrangement and sizable contributions from development partners enabled the authorities to address the worst humanitarian crisis in its history.

“Real GDP Growth is expected to pick up in 2017 due to better prospects for agricultural output, including the maize harvest. Annual inflation is also expected to remain on a downward trend. However, the macroeconomic outlook remains challenging, reflecting uncertainties related to adverse weather conditions and policy slippages.

“The near-term policy mix should center on reducing inflation by combining tight monetary and fiscal policies. To this end, expenditures should be limited to available resources and monetary policy should aim at maintaining positive short-term real money market interest rates.

“Strengthening public financial management, including through strong commitment controls, routine bank reconciliations, and regular fiscal reporting, remains critical to preventing the misappropriation of public funds and rebuilding trust and confidence in the budget process.

“Implementation of prudent fiscal policy is important to safeguard medium-term fiscal and debt sustainability. Improved revenue mobilization and expenditure efficiency will reduce aid dependency and create fiscal space for social spending in pursuit of Malawi’s sustainable development goals.

“Important steps have been taken to safeguard and strengthen financial sector stability, given the negative impact of weather-related shocks and the prevalence of credit concentration risks. To this end, the authorities are encouraged to closely monitor banks’ compliance with prudential norms, including AML/CFT, increase provisioning, and facilitate rationalization of the banking sector. Strengthening creditor rights and reducing lengthy judicial processes in recovering collateral will contribute to a reduction in non-performing loans.”