Malawi has received approval for a new three-year $112.3 million loan arrangement from the International Monetary Fund (IMF). The programme will enable the Southern nation attain its economic and financial reforms goal.
On Monday, IMF Deputy Managing Director Tao Zhang said in a statement “Malawi has shown progress in achieving macroeconomic stabilization following two years of drought, with a rebound in growth and inflation reduced to single digits.
“However, the fiscal position has deteriorated and the public debt to GDP ratio has risen. Increased debt service pressures have reduced space for needed infrastructure and social spending.”
With consideration to the efforts made by the Malawian authorities to establish macroeconomic stability, raise growth and reduce poverty, “IMF arrangement under the extended credit facility,” according Zhang will reinforce “the authorities’ programme and efforts.”
Prior to this development, in February, Finance Minister Goodall Gondwe said the government would target the reduction of borrowing and stick to an IMF programme in order to boost the economic growth rate to 7 percent in the medium term.
Malawian economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. It has a total public debt of $3.50 billion, with about a third of that in external debt.
Reuters reported that the IMF in a statement on Monday noted that the programme will facilitate the immediate disbursement of about $16 million. And although the remaining amount is subject to semi-annual reviews, the remaining amount will be phased over the duration of the arrangement.
The government, however, still faces strong challenges: to spur exports, to improve educational and health facilities, to face up to environmental problems of deforestation and erosion, and to deal with the rapidly growing problem of HIV/AIDS in Africa.