Updated: March 6, 2021
The International Monetary Fund’s executive board has approved the disbursement of $43.3 million financial assistance to Malawi, bringing total disbursements under the Extended Credit Facility (ECF) to about US $73.9 million.
The approval, on November 22, came after IMF executive board completed its second and third reviews of Malawi’s performance under its program supported by a three-year arrangement under the Extended Credit Facility (ECF).
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“Completion of the reviews enables Malawi to draw the equivalent of SDR 31.55 million (about US$43.3 million), bringing total disbursements under the arrangement to SDR 53.85 million (about US $73.9 million),” IMF said in a statement on Monday.
The three-year ECF arrangement was approved on April 30, 2018 for SDR 78.075 million (about US$107.7 million, equivalent of 56.25 percent of Malawi’s quota in the IMF), to support the country’s economic and financial reforms.
The policy priorities of the ECF arrangement aim to entrench macroeconomic stability, preserve debt sustainability, and advance governance reforms while fostering higher, more inclusive, and resilient growth.
“Despite large reconstruction and balance of payments needs following Cyclone Idai Malawi’s program performance has been satisfactory,” the First Deputy Managing Director Mr. David Lipton, and Acting Chair, said following the executive board discussion on Malawi.
Mr. Lipton said Program-supported structural reforms advanced, addressing several important gaps that had previously been identified in public financial management.
He added: “All quantitative performance criteria were met except those on the primary balance, which were missed largely due to faster than envisaged implementation of rural electrification and development projects, unexpected spending for disaster relief and to ensure safety during elections and post-election protests.
“The authorities aim to further entrench macroeconomic stability and preserve debt sustainability to support higher, more inclusive, and resilient growth.
“Fiscal policy will focus on improving revenue outcomes and spending management to strengthen the fiscal path while allowing for spending for post-cyclone reconstruction needs and to strengthen Malawi’s resilience to climate change. Monetary policy will continue to target inflation. Maintaining exchange rate flexibility and efforts to further strengthen financial sector resilience will be important for buffering shocks and supporting broad-based private sector development.
“The medium-term economic outlook is favorable. Low per capita economic growth and its resilience to weather shocks is expected to gradually improve with enhanced electricity generation and irrigation, as well as crop diversification.”