The International Monetary Fund (IMF) has approved the disbursement of $26.9 Million to Malawi under the Extended Credit Facility (ECF) programme.
The program is aimed at the achievement and maintenance of macroeconomic stability and implementation of policies and structural reforms to spur growth diversify the economy and reduce poverty.
The approval follows the completion of the ninth and final review of Malawi’s economic performance under the ECF arrangement by the IMF Board.
This brings total disbursements to Malawi under the arrangement to $191.4 million.
In a statement released after the meeting, IMF Deputy Managing Director Mitsuhiro Furusawa observed that Malawi’s economy has been severely hit by two consecutive years of weather-related shocks, which placed an estimated 40 percent of the population at risk of food insecurity.
He added that relief efforts helped stabilise maize prices and alleviate the adverse impact of the drought on the vulnerable population adding that the increase of access under the ECF arrangement and sizable contributions from development partners enabled the authorities to address the worst humanitarian crisis in its history.
The Fund, however, projects that Real GDP Growth is expected to pick up in 2017 due to better prospects for agricultural output, including the maize harvest.
It also added that Annual inflation is also expected to remain on a downward trend. However, the macroeconomic outlook remains challenging, reflecting uncertainties related to adverse weather conditions and policy slippages.
The IMF further advises that the near-term policy mix should centre on reducing inflation by combining tight monetary and fiscal policies by limiting expenditures to available resources and that monetary policy should aim at maintaining positive short-term real money market interest rates.
The government is also being pushed to strengthen public financial management, including through strong commitment controls, routine bank reconciliations, and regular fiscal reporting.
The Fund stresses that this remains critical to preventing the misappropriation of public funds and rebuilding trust and confidence in the budget process.
Improved revenue mobilization and expenditure efficiency is also being described as key in reducing aid dependency and create fiscal space for social spending in pursuit of the country’s sustainable development goals.
Capital Hill is also being called upon to implement what the IMF calls a prudent fiscal policy to safeguard medium-term fiscal and debt sustainability.