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| Business |
| Malawi may not finish IMF facility |
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by
Ephraim Munthali, 01 April 2004
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16:36:55
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Malawi may not complete the IMF funded Poverty Reduction Growth Facility (PRGF) programme by December, going by both current and previous trends.
PRGF is the Fund’s low interest lending facility for poor nations which is framed in line with the countries’ poverty reduction strategy papers.
Carrying an annual interest rate of 0.5 percent, governments start repaying the debt beginning five-and-a-half years and ending 10 years after the disbursement, according to the IMF web site.
Malawi’s current PRGF programme will expire on December 20, 2004 from December 21, 2000 when the Special Drawing Rights (SDR) 45 million rich PRGF arrangement was signed. SDR is an IMF currency.
The Fund suspended the programme just months after the first tranche citing overspending, corruption and privatisation delays as reasons.
Since then, the IMF has been conducting quarterly reviews on Malawi but results have given little hope of a return to the programme.
But Malawi still has an undrawn balance of SDR32 million, eight months before the programme expires, according to the latest publication of the IMF Survey.
Experts on Thursday said there is no room for Malawi to extend the deal.
“The normal practice is to negotiate for another agreement,” said Economics Association of Malawi (Ecama) spokesman Perks Ligoya.
Ligoya, a former IMF economist, said Malawi’s failure to complete the programme could send negative signals to bilateral donors who wait for the IMF’s approval before giving budgetary support.
Since 1980, Malawi has drawn funds for similar programmes just twice out of eight arrangements.
Between 1982 and 1983, Malawi drew all the SDR22 million and did the same for the SDR67 million rich Extended Structural Adjustment Facility (ESAF) which run between 1988 and 1994.
In 1980, the IMF offered SDR50 million for a two-year Stand-By deal but the country received SDR40 million.
Malawi got SDR57 million from the Extended Financing Facility (1983—1986) out of the approved SDR81 million.
From a 1994/1995 Stand-By facility worth SDR15 million, the country drew SDR12.7 million.
Malawi only utilised SDR41 million from another ESAF worth SDR 51 million which run from 1995 to 1999.
These arrangements demand prudent fiscal management, sound monetary policies and want governments to prioritise their expenditures on poverty.
“It is a shame that we can’t meet these conditionalities which we sign without being forced,” said Ligoya.
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