The International Monetary Fund (IMF) would be releasing $91 million loan money to Malawi after the board’s approval on Friday.
The IMF said the loan money would help Malawi meet the urgent balance of payment (BOP) needs stemming from the COVID-19 pandemic.
The loan was secured from the IMF under under the Rapid Credit Facility (RCF).
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The Rapid Credit Facility (RCF) provides rapid concessional financial assistance (loan) with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need.
IMF said the money is needed because the “pandemic is expected to have a significant impact on Malawi including affecting the near-term economic outlook, which has deteriorated significantly.”
· The authorities have proactively responded to the pandemic with a national response plan—supported by the World Health Organization and other development partners—and measures to preserve macroeconomic stability while protecting the vulnerable.
Mr. Tao Zhang, Deputy Managing Director and Chair, the COVID-19 pandemic is having a severe impact on Malawi, creating an urgent balance of payments need.”
“The IMF’s emergency financing under the Rapid Credit Facility will help the authorities meet the large external financing gap and catalyze further assistance from the international community. Additional concessional donor support will be critical to close the remaining external financing gap and facilitate the needed interventions to ease the economic and social impacts of the pandemic, while preserving Malawi’s hard-earned macroeconomic stability.
“A widening of the budget deficit is appropriate in the near-term, given the fiscal costs associated with the economic slowdown and critical additional health care and social spending needs, which should be executed transparently and targeted to the most affected parts of society. The authorities’ commitment to the audit of COVID-19 related spending is welcome. Once the crisis abates, it will be important to safeguard medium-term debt sustainability by boosting domestic revenue mobilization and enhancing public financial management.’’