The International Monetary Fund (IMF) on Wednesday announced a US$157 million Extended Credit Facility (ECF) to Malawi.
“The mission has reached staff-level understandings with the authorities on an economic programme for the fiscal years 2012/13–2014/15 that could be supported by a new ECF arrangement in the amount of about US$ 157 million,” said Tsidi Tsikata, IMF’s mission chief for Malawi. “The new arrangement is subject to approval by the IMF Executive Board which is expected to consider the authorities’ request in July 2012.”
The Malawi Government has reacted cautiously to the development, with Finance Minister Ken Lipenga saying Lilongwe is anxiously waiting to hear from the IMF board.
“It’s exciting news but it’s early days yet; we have to keep our fingers closed and hope the board approves this,” Dr. Lipenga said, adding: “We don’t have that many exciting news so people are justified to be happy with the news out of Washington.”
Tsikata said the new arrangement would replace the three-year arrangement approved in February 2010 which the Malawian authorities have requested to be cancelled in order to start on a clean slate.
“During our last visit to Malawi two months ago, the country was facing a severe foreign exchange shortage that was slowing down economic activity, as several enterprises scaled down their operations for lack of imported inputs, and fuel shortages disrupted transportation services and energy supplies, with ripple effects across all sectors,” he said.
Tsikata praised the Banda administration’s swift and bold decision to change economic policies “to address Malawi’s chronic imbalance between foreign exchange earnings on the one hand, and the demand for foreign exchange on the other.”
The IMF guru, however, expressed concern over “the recent revelation that the Ministry of Finance inflated revenue data reported to Parliament in the context of the midyear review of the budget earlier this year.
“The mission recommended that henceforth, the Malawi Revenue Authority must report information on its monthly revenue collections directly to the public and not just to the Ministry of Finance,” said Tsikata.
Malawi, reeling under massive donor aid cut due to late President Bingu wa Mutharika poor governance and human rights record, is on an overdrive to win back Western donor support.
Mutharika’s successor, Joyce Banda, who stepped in on 7 April after the 78-year-old succumbed to cardiac arrest two days earlier, is on charm offensive to win back donor sympathy.
So far, her charm offensive seems to be working with Britain last week announcing an immediate 33 million-pound injection into the economy. On Friday, Banda takes her charm offensive to Washington.