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IMF calls on Malawi to review its budget

Written by  Gladys Nthenda

The International Monetary Fund (IMF) says the Extended Credit Facility (ECF) US$150 Million Programme with Malawi has gone off track following the recent floods which negatively impacted the economy as the country’s economic growth is projected to decline by 3% this year.

Goodall Gondwe Goodall Gondwe


The development means the country will not be able to immediately access about US$20 Million loan disbursed from IMF due to Malawi if the Breton woods institution was satisfied with the country’ economic performance.


It also heavily compromises Malawi’s chances of getting back aid from other donors who suspended funding to government through the budget following cashgate.


Head of the Mission Oral Williams, who spoke during the presentation of their review findings in Malawi conducted from 16-30th October, suggested that Malawi has to review the K930 Billion 2015-2016 Budget as growth in the economy is much less than was anticipated.

“In 2013, you had the sudden withdrawal of external financing of the Budget in a very significant way. This year you had the floods and then you also had the drought”


“Now as a result of this; this had really impacted the economy in a negative way so as a result you have growth being projected this year in 2015 about 3% much lower than was envisaged earlier” noted Williams.


Oral explained that Malawi’s challenge is to collectively bring inflation down to single digit gradually and proposed that the country needs to broaden its export base and grow other crops like macadamia.


Although Malawi met program targets on net international reserves and domestic assets of the central bank for end June 2015, the Team indicated that government spent beyond its budget.


“Fiscal slippages equivalent to about 2% of GDP emerged during the second half of the 2014-2015 fiscal year in part because of overspending on the wage bill and these were exacerbated by revenue and external financing shortfalls. Observed Williams.


Finance Minister Goodal Gondwe agreed with the Breton Woods institution team that things are not well and that a team of experts from his Ministry is already working on reducing the Budget.


“We agree with the IMF that in the situation in which we are, there is need to have another look at the Budget and we will come out with figures of what revenues are likely to be possible in circumstances and then after that we will look at how the figures should look like from the expenditure point of view”.


“There is no doubt at all that this means that we will have to reduce total expenditure” Gondwe pointed out.


He pointed out this will be factored in the Mid-Year Review of the Budget.


The ECF is the IMF’s main tool for medium term financial support to low income countries and provides for a higher level of access to financing, more concessional terms and more focused streamlined conditionality.

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