APA-Lilongwe (Malawi) The International Monetary Fund (IMF) board has approved a four-year US$174 million credit facility for Malawi in a move seen as providing a cue for other donors to resume budgetary support for the southern African country following a decade-long hiatus.
Malawi’s President Lazarus Chakwera said the IMF board had “approved the Extended Credit Facility (ECF) to Malawi that we have been negotiating for the past two years.”
“Under this facility, Malawi will receive an injection of 174 million dollars over the next four years, as well as the resumption of direct budget support from international partners after a 10-year absence because of Cashgate and the financial mismanagement of the previous administration,” Chakwera said in a televised address to the nation on Wednesday night.
The Cashgate scandal involved the misappropriation of state funds through the transfer of funds from government bank accounts to private companies in disguise for payment of goods and services.
The scandal was uncovered in September 2013 when a government accounts clerk whose monthly emoluments were less than US$100 was found with huge sums of cash estimated at over US$300,000 in his car.
A subsequent forensic investigation ordered by the government revealed that public officers had manipulated the payment system to steal over US$32 million within six months from April 2013 to September 2013.
Chakwera said the latest IMF credit facility would “unlock foreign direct investments into the country to strengthen productivity.”
“As a result of our qualification for this IMF programme, several development partners have already lined up a number of financial facilities that will boost the supply of foreign exchange in our banks,” the Malawian leader said.
He added: “This includes the World Bank’s US$60 million Trade Finance Facility that will assist domestic banks to support importation of strategic commodities like fertilizer, pharmaceuticals and industrial raw materials.”
It also included a US$217 million World Bank package “in response to the fiscal reforms we have implemented, one third of which will be made available immediately.”
Chakwera is on Thursday also expected to launch the US$250 million Agricultural Commercialisation Project that is supported by the World Bank.
“These injections of foreign investment from our partners over the next four months will greatly enhance our foreign exchange reserves position and provide the macroeconomic stability needed for economic and business growth.”
Apart from the injection of liquidity into Malawi, the ECF programme is also expected to provide crucial signal to international investors that Malawi is back on track to being an investment-friendly economy whose economic and financial reforms meet the strictest international standards.
JN/APA