The International Monetary Fund (IMF) on Tuesday approved an extension of Malawi’s arrangement under the Extended Credit Facility (ECF) to June next year.
According to the global financial institution, the extension provides additional time for the Lilongwe to achieve the programme’s objectives.
ECF arrangement for Malawi is aimed at the achievement and maintenance of macroeconomic stability and implementation of policies and structural reforms to spur growth, diversify the economy and reduce poverty.
The development comes after the IMF has authorized the southern African nation to use over half of its $78.6-million extended credit facility to purchase food aid in September this year.
Currently, over 6.5 million Malawians are facing food shortages following El Nino induced drought that has ravaged the country over the past two years.
“The negative impact of the El Niño-induced drought continues to weigh heavily on economic activity and has placed an estimated 6.5 million people at risk of food insecurity,” a statement by an IMF official Oral Williams issued in September read in part.
It added: “In response to the humanitarian crisis, the Executive Board of the IMF approved the disbursement of $78.6 million. Of this, $49.2 million was explicitly intended to help the Malawian government finance imports of maize as part of the donor-coordinated humanitarian relief effort.”
The ECF is a lending arrangement that provides sustained programme engagement over the medium to long-term in case of protracted balance of payments problems.
Williams explained that Malawi requires additional resources to fully fund its Food Insecurity Response Plan.
On its part, Malawi has allocated about $49 million for maize purchases in the 2016/17 budget.
Malawi’s agro-based economy is currently sailing in troubled waters due to poor harvests of its main staple food maize and low prices of its key export tobacco.
In its statement, the IMF has noted that the country’s economic growth has declined for a second consecutive year, reflecting sharp falls in agricultural production and electricity generation, and weak growth in credit to the private sector.
According to IMF, Malawi’s economic turbulence is being reflected in a number of indicators including worsening public debt, “which has now risen from 40 percent of GDP in 2012 to 58 percent of GDP in 2016.”
IMF sister organisation, the World Bank in July this year warned Malawians to brace for tough economic ride as hunger would make attainment of economic stability challenging.
The global lender predicted that Malawi economy would grow by around 2.6 percent contrary to government’s forecast estimate of 5.1 percent.
“This year has been tough because of the drought and it is coming at the back of the floods, so it’s a very difficult time,” observed World Bank Country Representative, Laura Kullenberg.