Govt Engages IMF On New Extended Credit Facility

Malawi government has engaged the International Monetary Fund (IMF) for new Extended Credit Facility (ECF) programme.


IMF Country Representative, Jack Ree indicated that the mission is yet to reach an agreement with local authorities on a successor programme, but pointed out that it will most likely be another ECF programme.


He said the next programme will essentially be the part two of the previous ECF programme.


“Should this be the case then the discussion will likely be centred on how to cement gains made so far, particularly in macroeconomic stability and public finance management [PFM] while switching the policy gear to inclusive growth,” Ree told the local media.


Ree noted that authorities have managed to deliver expected outcomes on PFM, including fully reconciling government’s bank accounts, urging authorities to stay the course of fiscal consolidation and do more on strengthening the financial system’s stability.


“Monetary policy should keep its focus on fighting inflation until we can announce a clean victory. Over time, lower and more stable inflation and a more balanced budget will give us more space to respond to negative cyclical shocks.”


Treasury spokesperson, Davis Sado was confident on the next programme, stressing that authorities have continued to encompass policies to maintain tight fiscal and monetary policies to reduce inflation and interest rates and ensure medium-term fiscal sustainability.


“We have been in line with the fund’s requirements and managed to deliver expected outcomes of the PFM as well as stabilizing the macroeconomic environment. Soon we will sit down to make a decision on which direction we are likely to go in line with the programme which is yet to commerce.


“After consultations with various stakeholders, we came up with areas that government can focus on. We did an evaluation of the items, but we are yet to come up with a consensus,” he said.


The IMF completed its ninth review of the three-year ECF last June. ECF is a lending arrangement that provides sustained programme engagement over the medium to long-term.


The ECF arrangement amounting to $143.5 million (K105 billion)—which was meant to be a three-year programme—came into effect on July 23 2012 and concluded last year June.


An ECF programme lasts between three and four years, and  is meant to address a protracted balance of payment needs of a low-income country such as Malawi. Through the ECF programme Malawi has, with substantial donor support, successfully addressed its humanitarian crisis after two consecutive years of drought and floods.


The floods and drought negatively impacted 2.8 million people during the first half of 2015. In 2016, a second consecutive year of drought hurt growth and further placed about 6.7 million people at risk of food insecurity.