BLANTYRE--An IMF mission arrives in Malawi next week to kick-off formal negotiations on a new extended credit facility programme, an IMF official said Wednesday, after Malawi last year failed to review a $79.4 million credit facility meant to cushion chronic foreign exchange shortages.
Ruby Randall, the International Monetary Fund’s resident representative told reporters the mission had been in "regular contact" with Malawian authorities and it would also liaise with donors to help mobilise resources to support the implementation of a comprehensive reform package which includes social protection.
She said after the mission returns to Washington in June, the IMF expects to recommend the approval of a new programme for Malawi to its executive board.
The IMF said the programme with Malawi was "off-track" after the global lender disagreed with the southern African nation on the exchange rate, saying it was overvalued.
The country’s former president Bingu wa Mutharika, who died of heart attack last month, often argued strongly that devaluation would trigger inflation and hurt the poor in a nation where 39 percent of the 13 million citizens live on less than a dollar a day.
Malawi, which depends on aid inflows and agriculture for its economic survival, this week devalued its currency, the kwacha, by 50 percent, meeting demands of the IMF.
Randall said the IMF had welcomed the 50 percent devaluation and liberalisation of the kwacha, saying these were "important measures" that will help liberalise the foreign exchange market, increase the availability of foreign exchange and bolster investor confidence in the country.
"In short, ensuring that the exchange rate continues to reflect foreign exchange market conditions will help to encourage private investment and diversified growth," she said.
Meanwhile, Andrew Mwaba, a resident representative of the African Development Bank (AfDB), who chairs a grouping of donors under the Common Approach to Budget Support (CABS), told a meeting of the group's bi-annual review meeting that the IMF will issue a letter of comfort to donors to unplug balance of payments support to the country before the nod of Washington.
"The IMF letter of comfort will allow us to intervene immediately and so far the AfDB and the World Bank have indicated that we will expedite the release of funds."
The AfDB wants to pour in $445 million, while the World Bank wants to launch a rapid response operation by providing technical assistance to the 2012/13 budget process and bankroll programmes that can support social protection assistance for the poor.
---©2012 The Maravi Post. Reproduction authorised, with usual acknowledgment