The Board of the International Monetary Fund (IMF) has resumed its direct budgetary support to Malawi with an approval of the Extended Credit Facility (ECF) amounting to US$174 million.
President Dr. Lazaru McCarthy Chakwerae announced the news in a national address monitored on the Malawi Broadcasting Corporation on Wednesday evening.
IMF stopped providing direct budgetary aid to Malawi during the Democratic Progress Party (DPP) administration, under the leadership of former president Professor Arthur Peter Mutharika, over what it termed as “misreporting and misrepresentation of figures by the Reserve Bank of Malawi (RBM) under the governorship of Dr. Dalitso Kabambe.
The incumbent administration has been negotiating for the resumption of the direct budgetary support for the past two years.
President Chakwera, in his address, said following the resumption of the direct budgetary support, Malawi will receive an injection of USD174 million dollars through ECF over the next four years.
He added that this also means the resumption of direct budget support from international partners after a 10 year absence because of the cash-gate and the financial mismanagement of the previous administration.
“The benefits of this IMF Program are many, but allow me to mention a few critical ones. First, the IMF approval will unlock foreign direct investments into the country to strengthen productivity. For example, as a result of our qualification for this IMF Program, several development partners have already lined up a number of financial facilities that will boost the supply of foreign exchange in our banks. This includes the World Bank’s US$60 million Trade Finance Facility that will assist domestic banks to support importation of strategic commodities like fertilizer, pharmaceuticals and industrial raw materials,” he said.
President Chakwera further disclosed that World Bank’s 217 million dollar package in response to the fiscal reforms Malawi has implemented is also on its way, saying one third of this will be made available immediately.
He said this includes USD250 million from the World Bank for the Agricultural Commercialization Project, which he will be launching tomorrow in Ntchisi.
“From this, USD30 million has been set aside for the procurement and distribution of Maize to address the threat of hunger that is looming over several parts of the country. It also includes our ability to meet all the requirements for 70 million Euros in budget support from the European Union, 30 million dollars in budget support from the African Development Bank, and 6 million dollars in support from the International Fund for Agricultural Development. These injections of foreign investment from our partners over the next four months will greatly enhance our foreign exchange reserves position and provide the macroeconomic stability needed for economic and business growth,” he said.
Continued Chakwera: “Apart from the injection of liquidity into our system, the ECF signals to private sector international investors that Malawi is back on track with being an investment friendly economy whose economic and financial reforms have met the strictest international standards. It is these investments that will power our plans to ramp up production in Agriculture, Tourism, and Mining in line with our ATM Strategy, which includes scaling up the development of Mega Farms for exports, reorganizing and monetizing our minerals for reinvestment, and creating friendly conditions for eco-tourism. Additionally, many of you who run your own businesses and whose operations have been hampered by acute forex shortages can look forward to better and busier days for your business ahead, because the cornerstone of a strong economy is a strong private sector. In other words, the investment and business friendly environment that this IMF Program will stimulate in our economy over the next four months is a fresh opportunity for us to rebuild our economy.”
But the President was quick to remind Malawians that securing this fresh opportunity for rebuilding the economy has come at a painful cost of enacting reforms in the management of the economy, financial institutions, and historic debt.
He said he shares Malawians’ feeling of the agony of the painful corrections his government has undertaken in order to give the economy a fresh start.
“Aand I want you to know that I have not made these painful corrections lightly. At my inauguration on Independence Day three years ago, I carried in my heart the heavy burden of knowing that you had trusted me to correct the mistakes in economic management I had inherited. In that moment, I knew that I had the choice of either telling you the truth about how bad things were or continuing the lies of the past that claimed that our economy was built on sound principles and practices. But I chose to tell you the truth that day, which is why I told you that the principles and practices our economy had been built on previously were so unsound like a dislocated bone that even correcting them to create economic liberation would cause enormous pain for all of you. That pain I spoke of is the pain we are all feeling now, and that pain is going to continue for the next few months as we complete the process of putting the dislocated bones back into place. But once this short painful season of sowing ends, I assure you that a season of joyful harvest will come,” said Chakwera.