Economists are urging Treasury to speed up discussions with the International Monetary Fund (IMF) on a new Extended Credit Facility (ECF) programme to mitigate escalation of foreign exchange shortages.
In an interview on Thursday, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the mandate of the IMF is to ensure that there is macro-economic stability in the country.
He said: “In this case, we are having a situation where the ones charged with stabilisation are not here on the ground. Yes, it is borrowing but all we need is to ensure we are borrowing with conditions that make sense.
“The truth is that we need foreign exchange as soon as yesterday, having an IMF programme ensures that we do have the foreign exchange, the trade deficit is actually over $2 billion [K1.6 trillion] which is huge in our case”.
The Tonse Alliance administration cancelled the ECF Programme after assuming power in June 2020 in favour of a new one to align with its policies.
Coincidently, the 2020/21 National Budget was implemented without the ECF as government only opted for the Rapid Credit Facility (RCF) at the beginning of budget implementation.
However, experts feel that current instability in the macroeconomic fundamentals is partly due to the absence of the ECF Programme which helps to stabilise the economy at the same time unlocking donor in-flows following confidence building from the IMF programme.
Former Minister of Finance Joseph Mwanamvekha said during his tenure, the IMF programme was facilitating periodic disbursement of foreign exchange for balance of payment stability and it unlocked donor funds for various projects implemented by the government.
The country continues to face forex shortages which is affecting the smooth running of business especially for the industry players who rely on imported goods and services for production and trading.
Minister of Finance Felix Mlusu announced that government will work to have the ECF programme in place in the course of the 2021/22 National Budget implementation.