BLANTYRE-The Executive Board of the International Monetary Fund [IMF] has approved a disbursement of US$88.327 million [SDR 69.40 million] under the Food Shock Window of the Rapid Credit Facility to help Malawi address urgent balance of payment needs related to the global food crisis.
Food insecurity in Malawi has increased significantly owing to multiple tropical storms, below-average crop production, and increasing prices for food and agricultural inputs such as fertiliser and seed. As a result, about 20 percent of the population is projected to be acutely food insecure during the upcoming 2022/23 lean season [October 2022-March 2023], or more than twice as many people as in 2021.
The authorities also requested the Staff-Monitored Programme[SMP] and Programme Monitoring with Board involvement to build a track record of policy implementation, possibly paving the way to an IMF-supported Upper Credit Tranche [UCT]-quality program. The Board and Management welcomed the steps the authorities have taken since the Article IV Consultation in December 2021 to stabilize the economy and build the foundation for inclusive growth.
Following the executive board’s discussion, Bo Li, Deputy Managing Director and acting Chair said: “Malawi is facing a challenging economic and humanitarian situation, with foreign exchange shortages and an exchange rate misalignment leading to a sharp decline in imports including fuel, fertilizer, medicine, and food. Emergency financial assistance under the RCF’s new food shock window would help address urgent balance-of-payments needs and mitigate the impact of the food shock.”
Focus points
The management-approved staff monitored programme [SMP] is sufficiently robust to meet the authorities’ stated objectives, and its implementation is expected to achieve the purpose of building a track record toward UCT -quality programme supported by a Fund arrangement.
Malawi’s track-record building SMP will benefit from limited board involvement given the ongoing concerted international effort by creditors and donors to provide substantial new financing and debt relief to Malawi, as well as Malawi’s significant outstanding Fund credit under emergency financing instruments.
Fiscal discipline, supported by a realistic budget, an enhanced public financial management system and timely production of comprehensive fiscal reports, is important. Restoring price stability and ensuring financial sector stability will help build a foundation for private sector-led growth.
Rebuilding external buffers will be critically important to reduce Malawi’s vulnerabilities to external shocks. The Reserve Bank of Malawi [RBM’s] commitment to rebuild its foreign exchange reserves, requiring implementation of its strategy to wind down unsustainable policies including excessive use of swaps and trade credit to maintain strategic imports and other quasi-fiscal operations, is welcome.
https://thecooperator.news/centenary-bank-to-acquire-malawian-lender/
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