The Executive Board of the IMF meeting reviewed non complying disbursements by Malawi of K15.4 billion
By Cedric Nkungula
Sigh of relief. Malawi Government has been exempted from paying back a whooping K58.7 billion to the vexed global lender, International Monetary Fund (IMF) for the Reserve Bank of Malawi’s (RBM’s) sugarcoating of financial figures and lying on the economic situation of the country between the year’s 2018 and 2019, IMF Board announced on Wednesday.
During it’s reign, the erstwhile Democratic Progressive Party (DPP) was doctoring the country’s foreign exchange position figures to portray to the IMF that the country was performing well economically.
Currently, the Chakwera led government is working tooth and nail to bring the economy which was left in tatters, back on it’s feet.
A statement signed by IMF Press Officer Tatiana Mossot dated 17th November, 2022 revealed that Malawi has been exempted from paying back the money because the current administration has undertaken several corrective measures to remedy the situation and strengthen RBM’s reserve management.
The statement added that Malawi qualified for the waiver because the Chakwera led administration has also embarked on large macro economic adjustment and structural reforms to rebuild gross official reserves.
The IMF board mentioned the dismissal of the former governor of RBM from office in July 2020, completion of mid June 2022 special audit of RBM’s foreign exchange reserves for the first three reviews under the 2018 ECF arrangement and confirmed the non complying disbursements, publication of restated financial statements for financial year’s 2018 – 2018 and 2019 – 2020 in accordance with the 2021 safeguards assessment conducted by the IMF as well as improved data reporting to the fund as additional factors that forced the board to grant the waiver.
“In view of the authorities commitment to provide timely and acurate data to the IMF in the future and the remedial actions already taken, the executive board granted the waivers for the non observance of the performance criterion on the floor on NIR. The remedial actions taken and the additional corrective measures to be undertaken are contributing to rebuilding the reserves assets of the RBM and are therefore appropriate to achieve the objectives under the 2018 ECF arrangement,” says the statement.
The Executive Board of the IMF meeting reviewed non complying disbursements by Malawi of K15.4 billion and K43.3 billion following the completion of the first and combined second and third reviews of it’s three year Extended Credit Facility (ECF) arrangement approved on April 30, 2018.
IMF observed that Malawi misreported on it’s observance of the performance criteria on the floor on the Net International Reserves (NIR) of RBM leading to the non complying disbursements.
According to the statement, at the time of the first and combined second and third reviews under the ECF arrangements, the NIR for end of June and end December 2018, and end June 2018 were incorrectly reported RBM’s gross reserve assets were overstated due to inclusion of both pledged term deposits and assets through contracting short term swaps whereby the Technical Memorandum of Understanding (MOU) definition of the gross reserves assets explicitly excluded both.
The ECF arrangement was approved on April 30 for a total amount of US$112.3 million to support Malawi reform agenda. Under the combined second and third review, Malawi is said to have requested an augmentation of access of US$33 million to help address additional balance of payment needs associated with reconstruction following Cyclone Idai.