The country’s pursekeeper Felix Mlusu says cancellation of the International Monetary Fund (IMF) Extended Credit Facility (ECF) was a necessary decision given the country’s need for Balance of Payment (BoP) and budgetary support needs.
Mlusu was reacting to insinuation by spokesperson on Finance from the opposition Democratic Progressive Party (DPP) Joseph Mwanamvekha, that cancellation of the ECF programme has led to the loss of $70 million (about K53 billion).
Mwanamvekha, who is immediate past minister of Finance, described the budget as lacking the Tonse Alliance government’s promises such as free connectivity for water and electricity, reduced passport fees and free renewal of driving licences.
Mlusu announced in the K2.2 trillion 2020-21 National Budget delivered in Parliament on September 11 this year that government agreed with the IMF to mutually cancel the ECF programme despite having outstanding resources to be disbursed under the programme.
In his response to the budget statement, Mwanamvekha faulted Treasury for the action and argued that the nation lost K53 billion which could have helped to mitigate the impact of Covid-19 and stabilise the macroeconomic fundamentals in the economy.
However, when winding up the budget yesterday, Mlusu said on the contrary, Malawi gained a lot by cancelling the ECF.
He explained that while cancelling the programme, government agreed with the IMF for the Rapid Credit Facility (RCF) which had more resources to be disbursed within a short period of time compared to the remaining $70 million whose disbursement could be staggered over 18 months.
Said Mlusu: “I am pleased to inform the august House that few days ago, the Executive Board of the IMF approved a disbursement of funds to Malawi amounting to $101.96 million or K76.7 billion under the second RCF.
“Malawi did not lose the K53 billion from the terminated ECF programme but instead it has gained as it has received K76.7 billion. It should be noted that the K53 billion under the ECF programme would have been received in instalments spread over 18 months as opposed to the RCF which has been received at once”.
The Finance Minister said RCF is important in that it combines both budget support to the government purse and balance of payment support to the Reserve Bank of Malawi (RBM) hinting that over decades, IMF has not provided budget support and the current gesture signals undoubted restoration of trust in the new administration.
Mlusu explained that the IMF did not leave Malawi despite the failure to achieve most important targets by the previous regime as at end June 2020.
Discussion for the new ECF according to Mlusu will resume soon and once agreed it is expected that implementation will be done during the 2021/22 fiscal year.
He committed that the Tonse Alliance government will fulfil its campaign promises within the five years of its mandate and appealed for patience from the opposition and Malawians at large.
The minister said the opposition DPP should calm down because it left the government with high proportion of mandatory budget expenditures such as arrears at K280 billion and public debt situation of K4.1 trillion which caused unprecedented budget deficit.
On demands by cluster committees to increase allocation to some ministries, departments and agencies Mlusu revealed the demand accounted for a combined K310.9 billion which he said was not possible because of the prevailing thin resource envelope.
Budget and Finance Committee of Parliament chairperson Gladys Ganda said government has a daunting task to balance the budget between revenue realisation against expenditure because the K2.2 trillion 2020/21 National Budget was premised on unrealistic assumptions.
Leader of the House Richard Chimwendo Banda said government was impressed with the progress being made in parliamentary business as next week, the House will be considering passing vote by vote of the budget before it will be passed in totality.