IMF extends programme, analysts urge caution
Economic commentators have asked government not to be excited with the outcome of the just completed review of the country’s economic programme with International Monetary Fund (IMF), but consolidate on the gains and revive the economy.
In an interview yesterday in the wake of an IMF statement indicating approval of $76.8 million (about K54.9 billion) disbursement to Malawi and extension of the Extended Credit Facility (ECF) to end December 2016, Malawi Economic Justice Network (Mejn) executive director Dalisto Kubalasa called for fiscal discipline in managing the funds.
He said while the IMF decision in an indication that Malawi was moving in the right direction, there is a lot that needs to be done to heal from economic wounds.
Said Kubalasa: “Looking at the [IMF] statement, particularly on the disbursement of the $76.8 million which is meant to, among others, finance shortfalls which have affected our macroeconomic environment, it speaks volumes on how careful we need to be and ensure that we utilise the fund.”
On his part, Catholic University of Malawi head of economics department Gilbert Kachamba asked government to take the advice offered by IMF if the country is to recover from the current economic woes.
Kachamba said it is imperative to exercise caution when handling the fund.
He said: “We can only ask government not to relax but implement policies that put the economy where it is supposed to be because the fact is that our economy is in trouble.”
Malawi was granted a short extension of the ECF arrangement from May 22 to June 30 and it was approved by the IMF Executive Board on May 13 to give the authorities time to implement two prior actions for completing the seventh and eighth reviews.
In the June 20 statement, IMF acting chairperson Min Zhu, who is also deputy managing director, applauded Malawi for strengthening macroeconomic policies and stepping up the implementation of structural reforms to bring the programme back on track.
However, he observed that Malawi’s macroeconomic situation remains difficult, reflecting weather-related shocks and past policy slippages. He urged policies that should centre on reducing inflation by combining tight monetary and fiscal policies.
Ministry of Finance spokesperson Nations Msowoya, in an interview yesterday, said the move by the IMF is an indication that the country is striving to move in the right direction.
He said government is currently sustaining structural reforms, among others, bank reconciliations which is just a warm up of what government will be doing to retain the economy.
“We are happy that the fund and extension has been approved which means more time for us to work on our targets. The financial benefits will help improve, among others, the balance of payments position substantially,” he said.
ECF, the IMF’s lending facility, is an arrangement that provides sustained programme engagement over the medium to long-term in case of protracted balance of payments problems. It seeks to achieve and maintain macroeconomic stability and implementation of policies and structural reforms to spur growth to diversify the economy and reduce poverty.
