The Executive Board of the International Monetary Fund (IMF) has approved the immediate disbursement of an amount equivalent to Special Drawing Rights (SDR) 13.02 million (about US$ 20 million) to Malawi, an IMF statement said on Thursday.
The statement said that the approval followed the completion of the first review of Malawi’s economic performance under a programme supported by the Extended Credit Facility (ECF)
“The approval brings the total disbursements under the programme to an amount equivalent to SDR 26.04 million (about US$40.1 million),’’ it stated.
“In completing the review, the Executive Board approved a request for a waiver of the non-observance of the end-September 2012 performance criterion on the level of net domestic assets of the Reserve Bank of Malawi (RBM).
“The three-year ECF arrangement for Malawi in the total amount of SDR 104.1 million (about US$156.2 million) was approved on 23 July, 2012,’’ it noted.
The statement quoted Mr. Naoyuki Shinohara, IMF Deputy Managing Director and Acting Chair of the Board, as saying that, “drought in parts of Malawi lowered overall growth in 2012, and threatened the subsistence of nearly two million people’’.
He also said that, “a spike in food prices and the continuing depreciation of the kwacha contributed to a surge in inflation.
The external economic environment has also been more difficult than anticipated. Despite these challenges, performance under the Fund-supported program has been satisfactory’’.
He, however, said: “Tight monetary and fiscal policies are needed now to stabilize the exchange rate and curb inflation.
“Accordingly, the Reserve Bank of Malawi (RBM) has appropriately discontinued a temporary facility for uncollateralized lending to banks and increased the policy rate in early December,’’ the IMF deputy chief said.
Shinohara also added that, “fiscal policy is also playing a role, including with the reactivation of the automatic adjustment mechanism for fuel prices which has cut untargeted subsidies that mainly benefit the better off’’.
The statement further said that the bulk of the additional external financing provided by Malawi’s development partners will allow the government to increase outlays on social protection programmes without increasing domestic borrowing.