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The International Monetary Fund (IMF), impressed with Malawi’s budget and fiscal policy management in the first quarter of the 2003/2004 calendar, says it will have no excuse to suspend aid to Malawi again if the trend continues.
An IMF mission, which is in the country to carry out the first quarterly review, said this in Blantyre on Tuesday after briefing President Bakili Muluzi on the present economic indicators.
“So long as the policy effort and the process of putting the budget management procedures are all moving forward in a positive direction, we will work with that, we will move forward,” said Anupam Bassu, deputy director of IMF’s Africa division.
He, however, said the economic and budget management policies government is executing to develop more resources and sew up expenditures should not drive the inflation up and should not cause further problems to the debt situation.
The country’s inflation is now pegged at nine percent while the domestic debt is close to K50 billion, a stock analysts say is unsustainable.
Government says the debt was accumulated through maize importations while the remaining chunk was borrowed to fulfil its social obligations which were affected by the three-year donor aid freeze.
Bassu said government should quickly put in place good agriculture and food security policies to cushion itself in case of droughts to avoid borrowing heavily to finance maize imports as was the case last year.
“Provided you have normal weather conditions and provided the government continues to reduce and push the high interest rates down, the economy should grow,” he said.
“Good fiscal policies and low inflation will help the country move forward with its development and pro-poor expenditures (which) were being crowded out previously because of the financial problems; and by dealing with the financial problems, you create room for better results,” said Bassu.
Finance Minister Friday Jumbe pledged to continue with the fiscal programme, control expenditures and enhance revenue collection, conditions government previously failed and led to the aid suspension.
He said government is expecting money from various donors in the region of US$25 to US$30 million (about K3 billion) between now and December with further disbursements likely to come January after this review.
The IMF will disburse US$9.2 million under the Poverty Reduction and Growth Facility (PRGF) and US$6.6 million of Highly Indebted Poor Countries (Hipc) relief while more money will come from bilateral donors.
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