Malawi Government under IMF radar – IMF eager to put Malawi in more debt

Post was last updated: May 20, 2020

CHIMWEMWE GWENHAMO

The International Monetary Fund (IMF) is closely monitoring government’s expenditures on the recently disbursed funds aimed at averting impact of Covid-19 on the local economy.

The IMF approved a $91 million (about K67.3 billion) loan to Malawi for Covid-19 fight under the Rapid Credit Facility (RCF)

Under the RCF, the IMF imposed conditions for the government to adhere to, failing which, it would negatively impact on its performance under the Extended Credit Facility (ECF) programme.

Among the conditions were the need to publish all procurement documentation for Covid-19 specific expenditures, including tenders, bids, names of companies awarded contracts, products and services procured and their costs, publishing names of the beneficial owners of all firms winning such contracts.

It would also be required of the government to establish separate budget lines for Covid-19 specific expenditure and publish quarterly reports and fully engage the National Audit Office in auditing the expenditures from the ontset.

This is the first time the IMF credits have imposed such requirements on public procurement.

In an interview IMF Resident Representative, Farayi Gwenhamo, said they are working closely with the Ministry of Finance and the Public Procurement and Disposal of Assets Authority (PPDA) to ensure that the guidelines are followed.

“If these commitments are not followed through or for some reason the implementation is not done, then that will have a bearing on the ECF review.

“We are discussing with PPDA and they have made commitments to ensure the reporting of Ministries, Departments and Agencies (MDAs) is in line with commitments of the RCF,” Gwenhamo said.

The development has triggered thoughts among commentators that it reflects on a global change in IMF policy, prompted by the risk of governments’ cutting corners when undertaking urgent large-scale procurement in response to Covid-19 pandemic.

In a separate interview Economics Professor at Chancellor College, Ben Kalua, said this is a welcome development as it would ensure that the funds trickle down to intended beneficiaries.

“The Malawi government needs to be transparent not only to the donors but also the Malawian,” Kalua said.

Treasury Spokesperson, Williams Banda, refrained from commenting on the RCF funds, saying they rest in the hands of the Reserve Bank of Malawi (RBM).

He however, said funds under the World Bank grant are yet to be disbursed but were approved.

The World Bank also approved a $100 million (about K74 billion) grant for the strengthening of local authorities’ institutional performance, responsiveness to citizens and management of resources for public service delivery.

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