Malawi is finalising an audit of the country’s foreign exchange reserves commissioned last year in the wake of the alleged falsification of information about compliance with an earlier International Monetary Fund (IMF) bailout, the Fund said Monday.
In a statement following the conclusion of Article IV consultations with Malawi officials, IMF head of mission Mika Saito said the finalisation of the audit of Reserve Bank of Malawi (RBM) foreign exchange reserves “should pave way for consideration by the IMF’s Executive Board of the misreporting of RBM Foreign Exchange Reserve case.”
Malawi’s former finance minister Joseph Mwanamvekha and ex-RBM governor Dalitso Kabambe were arrested in December 2021 for allegedly misleading the IMF over the southern African country’s compliance with a bailout programme that ended in 2020.
The officials are suspected of having masterminded the falsification of information given to the IMF about Malawi’s international reserves for the IMF-supported programme entered between the Bretton Woods institution and the government of former president Peter Mutharika.
"The special audit of the official foreign exchange reserves of the Reserve Bank of Malawi (RBM) is now in the final stages,” Saito said.
She said the audit report would “form the basis for consideration of the pending misreporting of RBM Foreign Exchange Reserves by the Executive Board of the IMF.”
The outcome of the audit – as well as efforts by President Lazarus Chakwera’s administration to restructure the country’s public debt – is expected to determine whether Malawi’s latest request for a four-year Extended Credit Facility arrangement.
The authorities have requested an arrangement on the back of the protracted balance of payments problem.
While IMF support and its catalytic role in mobilizing donor support are critical at this juncture, being able to restore debt sustainability and resolving the misreporting case are pre-requisites for such support, Saito said.
"As this work progresses, the discussions with the authorities will resume towards a staff-level agreement,” she said.
The Malawian authorities have engaged French firm Global Sovereign Advisory to advise their efforts in addressing the country’s unsustainable public debt, which is currently estimated at over US$5.3 billion.
The government spends more than US$15 million a month on servicing the debt, according to the finance ministry.