Our Comment on IMF new agreement
According to the Times,Malawi on Thursday passed the International Monetary Fund (IMF) test as the fund’s executive board approved disbursement of $15.4 million under the Extended Credit Facility (ECF) programme
The IMF report is a shame. You would expect that in a country as poor as Malawi the focus would be on economic growth and structural changes that shift the population from low to high productivity activity. Instead, our focus is in piling up reserve and apparently, we have "overperformed" in this respect by going over the standard 3 months of imports. Accumulation of reserves is not a costless exercise. For one, it affects your import of vital inputs in production and medicines. Priding oneself of accumulating reserve under our dire conditions is irresponsible. And it is perhaps not surprising that the IMF has sought to protect its reputation by calling that an "overachievement". They did not ask for that. The IMF points out that the growth rate will barely exceed population growth. We know that to make the slightest dent in poverty Malawi must grow at least 7 per cent.
The reward for all the pain is peanuts - $15 million for a country claiming to have $1 billion in reserves. Usually one accepts IMF condition hoping that the IMF money will be a catalyst to funds from other donors. Now, this is not the case in Malawi. The donor's problem with Malawi is "governance issues". more specifically corruption. Our Minister of Finance should be at the forefront in the struggle against corruption.
Malawi needs an investment-led adjustment but the way our planners have handled the Nacala railroad (we still have no dry port) and the MCA power sector investment (we still have to begin the Neno coal power project and the interconnection to Caborra Bassa - all this despite a time lead of more than five years - leaves doubtful they can mount such a strategy and extremely frustrated and sad.
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