Malawi Gets ECF as Chakwera Outlines Austerities
The International Monetary Fund (IMF) has approved the $174 million Extended Credit Facility (ECF) to run for the next four years, president Lazarus Chakwera has announced.
The president made the announcement last night in a televised address, days after the Reserve Bank of Malawi announced a 44 percent devaluation of the local currency, Kwacha.
Chakwera added that the Facility has also opened the doors for the resumption of direct budgetary support from the foreign partners which has not been there for almost a decade now “because of Cashgate and the financial mismanagement of the previous administration.”
“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. It also includes the World Bank’s 217-million-dollar package in response to the fiscal reforms we have implemented, one third of which will be made available immediately.
“It also includes 250 million dollars from the World Bank for the Agricultural Commercialization Project, which I will be launching tomorrow, from which 30 million dollars 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,” he said.
The president said that the approval has also offered an opportunity for Malawi 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.
Chakwera has therefore, outlined some austerity measures to ensure that public funds are used prudently such as suspending his own foreign trips until the next financial year, starting with the forthcoming COP28 this month end.
“By extension, I am putting a freeze on all public-funded international trips for all public officers at all levels, including those in parastatals, until the end of the financial year in March.
“In fact, all Cabinet members currently abroad on public-funded trips must return to Malawi with immediate effect. Any travel deemed absolutely necessary by anyone during that period must be submitted to my office for my personal authorization,” said the president.
To cushion civil servants from the socio-economic hardships triggered by the 44 percent devaluation, Chakwera has ordered the minister of finance and economic planning to review perks.
“I have ordered the Minister of Finance to also include in that mid-year budget review provisions for a reasonable wage increase for civil servants.
“In the meantime, I have also directed him to review the Pay As You Earn income tax and incorporate a reduced percentage in the new budget he presents to Parliament in a few months so that workers whose incomes have lost value in the devaluation are helped with a lower tax burden,” he said.