IMF cautions Malawi on expenditure
The International Monetary Fund (IMF) on Tuesday described Malawi’s performance under the Extended Credit Facility (ECF) as ‘broadly satisfactory’ but asked government to keep its spending within available resources.
IMF Mission Chief for Malawi Tsidi Tsikata issued the advice at a news conference in Lilongwe at the end of the two-week review of the Malawi’s ECF arrangement which will enable Malawi to receive a disbursement of $20 million from IMF.
Said Tsikata: “In particular, it [the mission] urged authorities to keep government spending within available resources, and recommended wage restraint, the identification of lower priority expenditures that can be postponed in the event of funding gaps.”
He added that in view of Malawi’s past record of loose fiscal policies in election years, the mission highlighted the need for fiscal discipline to consolidate emerging gains from the ongoing policy reforms.
He said IMF also wants Malawi to ensure better enforcement of announced expenditure control measures, and adherence to regulations governing the procurement of goods and services using purchase orders generated through the Integrated Financial Management Information Systems.
But Tsikata stated that overall, IMF was pleased with Malawi’s performance saying following the conclusion of the third review of the program, nearly all the quantitative targets for end-March, 2013 were met.
In particular, Tsikata said after adjusting for shortfalls in the disbursement of aid flows, the targets on net international reserves, government net domestic borrowing, and net domestic assets of the Reserve Bank of Malawi (RBM) were met.
“A number of indicators suggest that macroeconomic policy reforms have began to bear fruit in form of increased availability of foreign exchange, the recent appreciation of the Kwacha, declining inflation, and rising capacity utilisation in the manufacturing sector,” said Tsikata.
He also said the mission commended authorities on efforts underway to reduce the cost of doing business in Malawi, including the passage of a number of laws and regulatory and administrative reforms.
Tsikata also said policy discussions during the period focused on risks to the economic outlook and measures to mitigate these risks.
Reacting to the call by IMF, Finance Minister Ken Lipenga welcomed the advice by the fund and reiterated the importance of the regular review meetings with IMF.
“We will continue to attach these quarterly meeting more importance as they have proven to be useful and help us move together [with IMF],” said Lipenga.
