IMF warns on fuel role change

Post was last updated: December 17, 2015

The International Monetary Fund (IMF) has warned Malawi on plans to transfer the role of importing fuel to government owned National Oil Company of Malawi (Nocma), citing issues of “transparency” and “liabilities to the budget”.

This follows government’s recent announcement that the role of importing fuel for the country will be shifted from the private-sector led Petroleum Importers Limited (PIL) to Nocma.

In a statement issued on Tuesday at the completion of Article VI Consultations for Malawi, the IMF is calling for openness as well as protection against overburdening the national budget with the change.

“Changes to the fuel import regime involving a greater role for the state-owned company should be transparent and include safeguards against the emergence of contingent liabilities for the budget,” reads the statement from the IMF, in part.

Article IV consultation are a routine economic assessment of member countries and apart from the issue of fuel imports, the report on the consultations for Malawi has also made a number of recommendations that could help restore microeconomic stability in Malawi.

The fund has, among other things, urged the government to address policy slippages that, it says, have prevented the country from achieving sustained growth and low inflation.

The IMF says the Malawi economic outlook is still subject to downside risks from various factors that include weather related supply shocks, the interruption of donor budget support and weaker demand for exports.

The IMF has also underscored the benefits of improved revenue mobilization to respond to rising demand for public services from a rapidly growing population and to reduce aid dependence.

“Directors [of the IMF] recommended broadening the tax base, strengthening tax compliance, and modernizing tax administration,” reads the statement.

They also emphasised the need for medium term fiscal sustainability while safeguarding social spending through improvements in the allocation and targeting of public spending.

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