Malawi gears for next ECF

Post was last updated: December 6, 2017

Malawians should expect a new Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF) probably in the second quarter of 2018, both Finance Minister Goodall Gondwe and IMF Resident Representative Jack Ree have indicated.
The development follows the conclusion of a three-year ECF amounting to $146.7 million approved in July 2012.
Ree said authorities have expressed interest in a successor IMF programme a number of times since last year and that the fund is discussing with the authorities on the timing and modality of a programme negotiation mission.
“If all goes well, we can expect to receive a team from Washington early next year,” Ree said.
He said IMF programmes usually serve as a means of balance of payment support for countries that are facing an economic crisis.
“However, in low income countries, pressures on balance of payment are closely linked with developmental challenges— and IMF’s ECF lending can be used to support structural reform and other growth enhancing policies—which would crowd investment and thus generate additional demand for foreign currency,” he said.
Ree observed that Malawi’s economy is turning around, with inflation finally being anchored on single digit and growth likely to come back.
“However, there is need to lock in gains in macroeconomic stability and fend off a backsliding of reforms achieved under the previous ECF programme. There is also a need to unlock the private sector’s investment potential by bringing in growth-enhancing structural reforms and resolving the electricity and water issues in a financially sustainable fashion.
“T h e negotiation f o r a new ECF programme will provide an opportunity to fit all of these considerations to a coherent framework to guide macroeconomic policies in the medium-term future,” Ree said.
He was quick to note that, although the on-going utility woes tend to overshadow everything at the moment, Malawians should not lose sight of the window of opportunity that Malawi has now.
“Inflation has finally reached single digits. And this seemed to be a wishful dream only a while ago. This is a game-changing development that will redefine Malawi’s economic fortune.
“However, we need to stay the course. We really don’t want to drop the ball this time. We also need to bring on bold reforms that will finally convince the private sector to invest in this economy’s future,” Ree said.
In an interview on Tuesday, Gondwe said the IMF had proposed that its mission team should visit Malawi in February 2018 to enhance talks on the new programme.
“However, we have told them that we will be busy with the mid-year budget review that time. So, we may meet them a month later, depending on their availability. We could as well meet them during IMF spring meetings in April,” Gondwe said.
He said though the economy has stabilised i t still needs an ECF programme to help it start registering higher levels of growth.

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