By Dumbani Mzale & Chimwemwe Mangazi:
President Lazarus Chakwera has assured International Monetary Fund (IMF) Managing Director Kristalina Georgieva that his government remains committed to strengthening resilience against climate-related shocks by addressing governance weaknesses.
Chakwera said doing so would be part of broader ongoing efforts to keep the IMF-supported programme in Malawi “out of jeopardy”.
He made this statement on Monday at IMF headquarters in Washington DC, United States, during a meeting with the IMF’s top executive.
He spoke in the context of Malawi’s implementation of the IMF-supported Extended Credit Facility (ECF), approved in September last year.
The programme is designed to assist Malawi in its efforts to restore a stable and sustainable macroeconomic position, consistent with the country’s vision for strong and durable wealth creation and growth, as outlined in Malawi 2063.
The two-year arrangement, worth $174 million, also aims to catalyse grant financing for Malawi from other traditional development partners.
Chakwera acknowledged to Georgieva that his government had struggled to meet some of the targets set under the ECF, partly due to the impact of external shocks on the Malawian economy.
“As you well know, Malawi’s economy is still largely agro-based, and negative developments in this sector distort any assumptions in the country’s economic performance,” he said.
Chakwera cited a number of climate-related shocks in the 2023-2024 season, such as the El Niño phenomenon, which rendered 5.7 million people food insecure, while also creating demand-pull inflation,as opposed to supply-push inflation.
He also told the IMF chief of another shock in the name of a constrained national budget due to lower-than-expected collections by the Malawi Revenue Authority (MRA), hence leading to a “burgeoning fiscus.”
But sounding optimistic amid all setbacks, Chakwera said Malawi believes in its ability to put the vehicles of government spending back on the ECF track for the restoration of long-term macroeconomic stability and internal and external imbalances, including debt management and sustainability.
In September last year, IMF Mission Chief for Malawi Mika Saito told journalists during a press conference that Malawi should aim at achieving a debt-stabilising primary balance in the medium term through a package of expenditure adjustments and revenue mobilization measures.
Meanwhile, Secretary to the Treasury Betchani Tchereni has said Malawians should understand that the ECF programme is fundamentally about economic management rather than just securing funding tranches from the Bretton Woods institution.
Among other things, the Treasury Secretary highlighted that the government has introduced bills to Parliament aimed at increasing revenue without overtaxing existing sources.
He said the government has enhanced efforts to boost non-tax revenue sources and is maintaining necessary social expenditures amid a positive performance in broad money growth and qualitative factors within the Reserve Bank of Malawi.
“We need to raise more revenues without milking the already thin cows. We are performing well, although itis a mixed bag, we are able to tick the boxes positively in some areas, although in others there is a lag or delay,” he said.
The Executive Board of the IMF approved a 48-month arrangement under the ECF for Malawi amounting to $175 million, with an immediate disbursement of $35 million made at the time.
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