The International Monetary Fund (IMF) says restoring debt sustainability and resolving the misreporting case are pre-requisites for approval of Malawi’s request for a four-year Extended Credit Facility (ECF.
An 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 ECF arrangement.
The IMF has said in a statement that while its support and its catalytic role in mobilizing donor support are critical, there is a need for Malawi to to restore debt sustainability and resolve the misreporting case which are prior conditions for the support.
“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.
“The 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.
“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,” Saito said in a statement.
Saito, however, welcomed the recent devaluation of the Malawi Kwacha by 25 percent saying it is a step taken 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.
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.
Speaking at a press briefing this morning, Minister of Finance Sosten Gwengwe expressed confidence that Malawi will get the ECF program with the IMF as the country is resolving the issues of the debt levels and misreporting.
“If you ask my honest opinion, I would say we have high chances we have done a greater part,” Gwengwe said.
The Malawi Government has been accusing the Democratic Progressive Party administration of misreporting figures to IMF. Former Reserve Bank of Malawi Governor Dalitso Kabambe and former Finance Minister Joseph Mwanamvekha were arrested last year over the issue. London based Ernst and Young is currently conducting an audit into the misreporting.
Malawi has a debt of K5.5 trillion and spends 15 million US dollars a month on servicing the debt. Gwengwe said last month that the country has hired a French firm to advise on debt sustainability.
Kabambe, Mwanamvekha arrested for falsifying economic figures – Malawi Police
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