International Monetary Fund (IMF) has given a debt service relief to Malawi and 24 other poor countries under the Catastrophe Containment and Relief Trust (CCRT) in response to the coronavirus (Covid-19) pandemic.
In a statement issued on Monday, IMF managing director Kristalina Georgieva said the arrangement provides grants to IMF’s poorest and most vulnerable members to cover their IMF debt obligations over the next six months.
She said the relief will also help Malawi and other counties channel more of its scarce financial resources towards vital emergency medical and other relief efforts.
Said Georgieva : “The CCRT can currently provide about $500 million [about K370 billion] in grant-based debt service relief, including the recent $185 million [about K136 billion] pledge by the United Kingdom and $100 million [about K74 billion] provided by Japan as immediately available resources.
“Others, including China and the Netherlands, are also stepping forward with important contribution.”
The CCRT enables the IMF to deliver grants for
debt relief benefiting eligible low-income countries in the wake of catastrophic natural disasters and major, fast-spreading public health emergencies.
Last week, both Minister of Finance, Economic Planning and Development Joseph Mwanamvekha and IMF resident representative Farayi Gwenhamo confirmed the impending fiscal relief of $150 million (about K110 billion) to Malawi as a direct response to help the country fight the coronavirus (Covid-19) crisis.
Mwanamvekha said because of coronavirus, obviously revenue will come down as overall limited economic activity will negatively affect the performance of value added tax (VAT), withholding tax and pay as you earn (Paye), among others.
Treasury spokesperson Davis Sado said: “The swift action of the IMF board will help the country channel the freed resources that were earmarked for debt repayments towards various in areas that have been identified as being crucial towards the fight against the Covid-19 pandemic.”
He said resources will also help the country in cushioning the economy against shocks arising as an impact of the Covid-19 pandemic, adding that Treasury is also keeping fingers crossed for other partners to help on the matter.
For the 2019/20 fiscal budget, payment of interest on the country’s public debt is projected at K243.9 billion or 3.9 percent of gross domestic product (GDP), representing an 8.8 percent increase from the amount paid last financial year.
Of this total, K15.5 billion is for foreign interest payment, while K228.5 billion is for domestic interest payment.