The International Monetary Fund (IMF) has asked Malawi to advance structural reforms and improve governance and transparency to remain on track in the fund-supported Extended Credit Facility (ECF).
IMF expressed the sentiments in a statement where it also announced approval of disbursement of $15.4 million (about K11.3 billion) after Malawi’s successful completion of the first ECF review.
In the statement issued on Wednesday, IMF acting chairperson Tao Zhang, who is also the fund’s deputy managing director, said Malawi’s programme performance has been satisfactory.
He said Malawi performed well in terms of international reserves and reduction in the Reserve Bank of Malawi (RBM) holdings of government securities.
But Zhang implored fiscal authorities to maintain recent momentum in safeguarding and strengthening financial sector stability by improving banks’ risk management and closely monitoring large borrowers.
“Advancing structural reforms and improving governance and transparency will be critical to attaining strengthened economic outcomes.
“Key elements of this strategy include public financial management reforms—including routinising bank reconciliation, improving commitment control and cash management, and enhancing the transparency of the budget process—as well as further improvements to public investment management, oversight of state-owned enterprises and debt management,” he said.
Reacting to the news, Minister of Finance, Economic Planning and Development Goodall Gondwe said Treasury and the central bank will assess the IMF statements and recommendations to improve on noted shortfalls.
He said: “The [IMF] board has noted some flaws on the public finance management issues and think that we can do better. We will, thus, work towards improving this.”
In completing the review, the IMF also approved fiscal authorities’ request for waivers for the nonobservance for the quantitative performances on the primary fiscal balance and on new non-concessional external debt.
The board also approved treasury’s request on modification of the end-December 2018 performance criteria on reserve money, net international reserves of the central bank and the primary fiscal balance.
Malawi was granted a $112.3 million (about K82.5 billion) three-year programme under the ECF arrangement to entrench macroeconomic stability and to foster higher, more inclusive and resilient growth.
While outlining the move entails confidence in the economy, economist Alick Nyasulu advised fiscal authorities to take the caution on managing large borrowers from the banking system seriously.
In an interview, Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe, while pointing out that the move points to positives, cautioned government to stay on course.