First round ECF discussions with Malawi a success-IMF
Malawi Government has successfully defended first round of a four year US$350 million International Monetary Fund (IMF) Extended Credit Facility program, the IMF has said.
IMF Team was in the country for the ECF programme from 25 May, 2022 to 3 June, 2022.
Addressing the press conference at the Capital Hill in Lilongwe, Minister of Finance Sosten Alfred Gwengwe said the Malawi Government through the Ministry of Finance and Economic Affairs and the Reserve Bank of Malawi held serious discussions with the IMF via hybrid format (virtual and in-person) and face to on the new ECF.
Gwengwe described the discussions with IMF very fruitful.
“We had positive and very productive discussions on policies that this country needs to restore macroeconomic stability, attain debt sustainability and necessary structural reforms needed to support sustainable and inclusive economic growth to fast track the country’s recovery from the impacts of the Covid-19 Pandemic, the climate related shocks and spillover effects from the war in Europe,” said Gwengwe.
Gwengwe said the IMF and Government officials discussed recent economic developments including the impact of the recent normalization of the exchange rate, the foreign exchange reserves situation and the rising inflation rate.
Gwengwe said Policy discussions focused on RBM’s foreign exchange management and strategies that could help in accumulation of gross official reserves by the RBM.
“On the fiscal side, our discussions focused on the need to align budget execution with available resources to ensure that Government minimizes recourse to debt creating financing of the budget.
“Emphasis was on the need for Government to monitor budget commitments and also to ensure transparency through production of periodic budget execution reports,” he said.
According to the Minister, the briefing with IMF was designed in such a way that the first leg will largely focus on structuring the program parameters
including the macroeconomic framework for the next four years.
“However, conclusion of our negotiations with the IMF for a new program is dependent on finalization of the Special Audit on foreign exchange reserves transactions and misreporting that happened at the Reserve Bank during the period from 2018 to 2020,” he added.
He said the misreporting case is taken seriously by the IMF because Malawi was giving false information to the IMF in order for the Fund to disburse balance of payment support.
Gwengwe said the danger which may come as a result of Democratic Progressive Party (DPP) led Government lies might be that Malawi might refund US$70 Million.
“As we speak, Malawi may be asked to refund all resources that were disbursed during that period. The Special Audit Report at the Reserve Bank is expected any time around mid-June 2022,” said Gwengwe.
He said another prerequisite for Malawi concluding these negotiations is to come up with a strategy to bring about debt sustainability.
“As we all know, Malawi’s debt was classified as unsustainable mainly because of some unconcessional and therefore expensive loans that were
contracted by RBM in 2018.
“As per the standing principles and guidelines of the IMF no country can be on an IMF program with unsustainable debt,” said the Minister.
Gwengwe said to correct the current debt burden Malawi Government has recruited a debt advisor called Global Sovereign Advisory (GSA).
“The advisor was appointed on the 13th May 2022 through a tender process organized and funded by the European Union. The GSA team has since been working with the Malawi Government,” he said.
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