LILONGWE-(MaraviPost)-The International Monetary Fund (IMF) on Wednesday, November 15, 2023, approved an Extended Credit Facility (ECF) to Malawi for the next four years.
The approval is expected to unlock Malawi’s budgetary support from donors.
Addressing the nation on Wednesday evening, President Lazarus Chakwera said the ECF approval comes after two years of negotiations with the IMF.
“Under this facility, Malawi will receive an injection of 174 million dollars over the next four years, as well as the resumption of direct budget support from international partners after a 10-year absence because of Cashgate and the financial mismanagement of the previous administration.
“The benefits of this IMF Program are many, but allow me to mention a few critical ones. First, the IMF approval will unlock
foreign direct investments into the country to strengthen productivity,” says Chakwera.
He added, “For example, as a result of our qualification for this IMF Program, several development partners have already lined up several financial facilities that will boost the supply of foreign exchange in our banks. This includes the World
The bank’s US$60 million Trade Finance Facility will assist domestic banks in supporting the importation of strategic commodities like fertilizer, pharmaceuticals, and industrial raw materials.
“It also includes the World Bank’s 217 million dollar package in response to the fiscal reforms we have implemented, one-third of which will be made available immediately. It also includes 250 million dollars from the World Bank for the Agricultural Commercialization Project, which I will be launching tomorrow, from which 30 million dollars has been set aside for the procurement and distribution of Maize to address the threat of hunger that is looming over several parts of the country”.
Chakwera lauds further, “It also includes our ability to meet all the requirements for 70 million Euros in budget support from the European Union, 30 million dollars in budget support from the African Development Bank, and 6 million dollars in support from the International Fund for Agricultural Development. These injections of foreign investment from our partners over the next four months will greatly enhance our foreign exchange reserves position and provide the macroeconomic stability needed for economic and business growth.
“Apart from the injection of liquidity into our system, the ECF signals to private-sector international investors that Malawi is
back on track with being an investment-friendly economy whose economic and financial reforms have met the strictest
international standards. It is these investments that will power our plans to ramp up production in Agriculture, Tourism, and Mining in line with our ATM Strategy, which includes scaling up the development of Mega Farms for exports, reorganizing and monetizing our minerals for reinvestment, and creating friendly conditions for eco-tourism”.
Chakwera explains, “Additionally, many of you who run your businesses and whose operations have been hampered by acute forex shortages can look forward to better and busier days for your business ahead because the cornerstone of a strong economy is a strong private sector. In other words, the investment and business-friendly environment that this IMF Program will stimulate our economy over the next four months is a fresh opportunity for us to rebuild our economy.
“I am sure you now know that securing this fresh opportunity for rebuilding our economy has come at a painful cost. It has come at the painful cost of enacting reforms in the management of our economy, our financial institutions, and our historic debt. I know that all of you are feeling the agony of the painful corrections we have had to make to give our economy
a fresh start, and I want you to know that I have not made these painful corrections lightly”.
The ECF approval comes after IMF told the Chakwera government to devalue Malawi Kwacha by 44% which is hurting locals as prices of essential goods and services have risen beyond imagination
In August 2020, President Chakwera’s Tonse Alliance government mutually agreed with the IMF to cancel a three-year ECF due to policy change.
Former Finance Minister Felix Mlusu announced the cancellation of the three-year US$107.7 million arrangement approved on April 30, 2018.
