IMF Approve US$ 76.8 M To Malawi

International Monetary Fund (IMF) Executive Board approves US$ 76.8 Million disbursement to Malawi.

According to press release from IMF, the Board approved the support on Monday 20th June 2016 after completion of the seventh and eighth reviews of Malawi’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement. 

The Board’s decision for the immediate disbursement of the US$ 76.8 million, bringing total disbursements under the arrangement to US$ 169.1 million.

"In completing the reviews, the Board also approved the authorities’ request for an extension of the current ECF arrangement to end December 2016 and an augmentation of access by the equivalent of SDR 34.7 million (about US$ 49.2 million or 25 percent of quota). The requested extension would give the authorities more time to achieve the original objectives of the program while the additional financing will help to strengthen the country’s response to the El Niño induced drought which has caused a humanitarian crisis." Reads the statement 

The statement further indicates that the Board also approved the Malawi's request for waivers of non-observance of performance criteria related to net domestic borrowing by the government and net international reserves.

The three-year ECF arrangement for Malawi in the total amount of SDR 104.1 million (about US$ 144.4 million) was approved on July 23, 2012

The IMF statement further indicates that at the conclusion of the Executive Board’s discussion, Mr. Min Zhu, Acting Chair and Deputy Managing Director, issued statement has praised Malawi Government efforts in strengthening macroeconomic policies and implementation of structural reforms over the last year to bring the program back on track.

Mr. Min Zhu however, advised Malawi to focus on reducing inflation by combining tight monetary and fiscal policies as well ensure that expenditures are limited to available resources and monetary policy should aim at maintaining positive short-term real money market interest rates.

He also stressed on need to accelerate the implementation of public financial management reforms in order to build trust and confidence in the budget process and ensuring control over fiscal operations. 

"Strong commitment controls, routine bank reconciliations, and regular fiscal reporting remain critical to preventing potential misappropriation of public funds and reviving donor re-engagement.

“The pursuit of prudent fiscal policy is critical to safeguarding 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." advised Mr. Min Zhu

While observing that important steps have been taken over the last two years to safeguard and strengthen financial sector stability, Mr. Min Zhu said recent weather-related shocks and the prevalence of credit concentration risks, the authorities are encouraged to consider additional measures, including higher capital requirements, improved credit assessments, higher provisioning, and bank mergers to mitigate risks.