Ministry of Finance, Economic Planning and Development says the International Monetary Fund (IMF) approved $91million (about K67.7 billion) emergency loan to Malawi will help cushion the country from foreign exchange shortage.
Minister of Finance, Economic Planning and Development Joseph Mwanamvekha said in an interview on Saturday that at the moment, the economy is not generating enough foreign exchange because it is not exporting.
He said the loan is, therefore, a signal of the fund’s trust and confidence in Malawi Government’s economic management.
Said Mwanamvekha: “As a country, we are not generating enough foreign exchange because we are not exporting as we used to and revenues have slowed down.
“This disbursement is, therefore, timely as it will cushion the country from lack of foreign exchange and help us manage
the exchange rate and ensure stability of the same.”
On Friday, the IMF approved resources amounting to $91 million (about K67.7 billion) to help Malawi meet the urgent balance of payment (BoP) needs stemming from the coronavirus (Covid-19) pandemic.
The approval of the funds follows a meeting by the IMF Executive Board on Friday, which ratified the Rapid Credit Facility for Malawi in view of the potential impact of Covid-19 on the country’s near-term economic outlook.
IMF deputy managing director Tao Zhang in a statement on Friday noted that Malawi is being severely affected by the Covid-19 pandemic as spillovers from the sharp global slowdown as well as the economic disruption in the region are weighing on international trade, tourism, remittances, investment, and consumption.
He observed that while the deteriorating macroeconomic outlook and policy responses to mitigate the impact of the pandemic on Malawi are creating an urgent BoP need, authorities have been proactive in mitigating the impact of the pandemic.
Tao, however, cautioned that the widening of the budget deficit is appropriate in the near-term, given the fiscal costs associated with the economic slowdown and critical additional healthcare and social spending needs, saying this should be executed transparently and targeted to the most affected parts of society.
Chancellor College economics professor Ben Kaluwa while pointing out that the move eases the burden on authorities as the country faces severe economic shocks in view of the pandemic, urged government to properly manage the funds.
Last month, IMF also gave Malawi a debt service relief, through which the country is to save about K7.2 billion, under the funds’ revamped Catastrophe Containment and Relief Trust as part of the fund’s response to help address the impact of the Covid-19 pandemic