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Wednesday, December 19, 2007

Malawi impresses IMF--gets US$18 m
By GERALD NAMWAZA - 19 December 2007 - 13:05:38

INTERNATIONAL Monetary Fund (IMF) Monday approved a US$18.1 million (about K2.6 billion) disbursement to Malawi under Poverty Reduction and Growth Facility (PRGF) arrangement.

The executive board of the IMF says it was compelled to dish out the cash after Malawi successfully met the economic targets in the fourth and fifth review of the three year programme started in 2005.

“The completion of the review enables the release of SDR 11.45 million (about US$18.1 million), bringing total disbursements under the arrangement to SDR 33.4 million (about US$52.9 million),” reads part of the IMF statement.

Following the executive board discussion on Malawi, Takatoshi Kato, Deputy Managing Director and Acting Chair praised the country for its unflinching resolve to grow the economy.

"Malawi has shown commendable performance under its PRGF-supported program. Economic growth remains high and inflation has continued to decline. This should continue to support Malawi's poverty reduction and development efforts,” Kato says.

This should come as good news to Finance Minister Goodall Gondwe, who last month in Blantyre, told journalists the economy was on the right track and that the IMF was impressed with the country’s progress.

Inflation has gone down from 9.6 percent in January this year and was at 7.2 percent in October while the local economy is estimated to grow at about 7 percent, a situation that prompted Reserve Bank of Malawi (RBM) to cut the bank rate from 17.5 percent to 15 percent last month.

"The domestic debt burden has declined further, though somewhat less rapidly than expected. Fiscal policy implementation has been supported by strong revenue performance, and the recent improvement in the government's control of payroll execution has facilitated the lifting of the program's ceiling on the wage bill,” says the IMF statement.

However, IMF says government's domestic borrowing targets came under pressure from unforeseen challenges, including delays in aid disbursements and unexpectedly high interest payments.

"The improvement in the macroeconomic environment has permitted the monetary authorities to bring inflation down to single digits while maintaining a stable exchange rate. Inflation is expected to remain in single figures.

However, monetary policy implementation came under some strain in mid-2007, and the authorities need to address the ensuing rapid monetary expansion.

"The program envisages economic growth in 2007 /08 spreading beyond the agricultural sector and remaining high. Further declines in the domestic public debt burden should continue to support robust private sector credit growth,” Kato says in the statement.

The IMF, has since advised government to put greater emphasis on structural reforms and improve public financial management in addition to creating a better business environment.

The three-year PRGF arrangement for Malawi was approved on August 5, 2005, for a total amount of SDR 38.2 million (about US$60.4 million) to support the government's economic program for 2005-2007 after being suspended in 2001 when the previous government went off track.

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