News that the International Monetary Fund (IMF) has approved the disbursement of US$76.8 million to Malawi, might be exciting but does not offer any hope for the country’s economic recovery.
On Monday the IMF Executive Board completed the seventh and eighth reviews under Malawi’s Extended Credit Facility (ECF) arrangement and approved the disbursement.
The three-year ECF arrangement which was approved in July 2012 sees Malawi pocketing a total of US$144.4 million.
Chancellor College economist, Ben Kaluwa, said though the development is welcome, the funds will make a minimal difference on the country’s ailing economy.
He, however, said the timing is good as most imports are done from August.
He further said the US$76.8 million is nothing in terms of improving the current economic status.
Kaluwa said there is a lot that needs to be done in order to change the country’s economic status.
“The funds will make a minimal difference since as a country we depend too much on imports. We need about US$2 billion to cover up on the imports and stabilise the economy.
“However, this is better than nothing and the government should work hard to manage the resources and avoid over borrowing domestically,” he said.
Reserve Bank of Malawi publicist, Mbane Ngwira, said the funds will add close to two weeks of imports.
Malawi spends about US$200 million a month on imports.
“The main issue is the endorsement of the economic policies that are being pursued by the authorities. This will give the confidence to investors that Malawi is on the recovery path.
“The more investment domestic or foreign, the faster the economy would recover and grow,” said Ngwira.
He further said the development gives the authorities the zeal to press on with economic reforms for the betterment of Malawians especially the rural poor.
In his statement IMF Acting Chair and Deputy Managing Director Min Zhu, said the country’s macroeconomic situation will remain difficult.
“The authorities have strengthened macroeconomic policies and stepped up the implementation of structural reforms over the last year to bring the programme back on track. Nevertheless, Malawi’s macroeconomic situation remains difficult, reflecting weather-related shocks and past policy slippages, which contributed to persistently high inflation.
“Real GDP growth declined sharply due to floods and drought in 2015 and is expected to drop further this year owing to the region-wide El Niño-induced drought. A poor maize harvest for a second consecutive year has placed half of the population at risk of food insecurity.
Short-term risks that could arise from adverse weather conditions, lower global demand for Malawi’s exports, and policy slippages
continue to weigh on the outlook,” said Zhu.
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