The International Monetary Fund (IMF) mission from Washington DC has failed to complete its periodic review of the Extended Credit Facility (ECF) programme with Malawi which is still off-track.
The mission said at the end of its assignment yesterday that Malawi is passing through hard times due to shortfalls in budget support following concerns about Cashgate, a rapidly depreciating kwacha and the accumulation of significant domestic debt.
The Bretton Woods institution, whose mission was in the country for the past two weeks, has said the ECF is still off track due to failure by government officials and IMF to complete the fifth and sixth periodic reviews for the programme.
“The country is passing through very difficult times. Policy implementation continues to take place under difficult circumstances,” said the new IMF Mission Chief for Malawi Oral Williams who led the team that visited the country from October 29 to November 12 2014.
Williams said shortfalls in budget support due to Cashgate have led to challenges in the execution of the previous and the current year’s budget with increased recourse to costly domestic financing and the accumulation of significant domestic debt.
He added: “At the same time, the exchange rate has weakened considerably, exacerbating inflationary pressures.”
Williams said the mission emphasised greater control over spending commitments in line with available financing to avoid the accumulation of additional debt.
He said the mission also noted that containing spending within approved ceilings would allow fiscal policy to be supportive of monetary policy and mitigate the impact of inflation on the most vulnerable segments of the population.
Reacting to the IMF assessment, Minister of Finance, Economic Planning and Development Goodall Gondwe agreed that the economy is currently passing though ‘turbulent times’ due to ravaging impacts of Cashgate.
Said Gondwe: “Cashgate is a thing that has disturbed. This is not the only country that has passed through such turbulent times. But we are talking to our donors and we hope some will come back [with budget aid] and I suspect that these challenges will be a thing of the past soon.”