The International Monetary Fund (IMF) has completed its ninth review under Malawi’s Extended Credit Facility (ECF), allowing the country to receive US$26.9 Million (K19.5 billion).
The approval of the funds means Malawi has received a total of US$191.4 million under the arrangement. US$143.5 million of the money is for the ECF as approved in 2012 while US$47.8 million was given last year for Malawi to deal with the impact of a drought that was induced by the El-Nino weather pattern.
The disbursement aims at stabilising macro economy, spurring economic growth and reducing poverty levels in Malawi.
According to IMF, Malawi’s Real Gross Domestic Product (GDP) is to go up with good harvest from the past farming season as the economy is being driven by agriculture. Annual inflation is also expected to remain on a downward trend.
However, the lending institution notes that macroeconomic outlook remains challenging, reflecting uncertainties related to adverse weather conditions and policy slippages.
Following the Executive Board’s discussion, IMF Deputy Managing Director Mitsuhiro Furusawa, asked Malawi to reduce inflation by combining tight monetary and fiscal policies. He also advised that expenditures should be limited to available resources.
“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,” said Furusawa.
The IMF Deputy Managing Director noted that Malawi has already taken important steps to safeguard and strengthen financial sector stability, given the negative impact of weather-related shocks and the prevalence of credit concentration risks.
He however encouraged Malawi to closely monitor banks’ compliance with prudential norms 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,” he said.
Malawi relies on agriculture for economic growth, but the effects of climate change in 2015 and 2016 witnessed the country’s economy performance worsening.
The effects of climate change led the country to be food insecure, as many households were reported to have realised enough harvest for their survival.
The development saw government pleading for help to help the starving population in Malawi due to hunger.