IMF board approves $178m loan to support Malawi

BREAKING NEWSNovember 19, 2023 at 10:04 AM UTC

The executive board of the International Monetary Fund (IMF) has granted approval for a loan totaling around $178 million to Malawi, with an immediate disbursement of around $35 million, as announced in a statement.

Malawian authorities had previously reached a staff-level agreement with the IMF for a four-year Extended Credit Facility back in September. In response to severe shortages of fuel, medicines, and fertilizers linked to foreign currency shortages, Malawi devalued its currency by 30% earlier this month.

Finance Minister Simplex Chithyola Banda expressed relief, stating, "The decision is a big breather for us and our economy." He highlighted two major expected benefits: the resumption of budgetary support from traditional donors and the alleviation of foreign currency shortages. Malawian President Lazarus Chakwera, claims that the IMF program would pave the way for additional financial support from development partners.

Key Takeaways

Landlocked Malawi is currently undergoing a recovery process from a series of setbacks, including its most severe cholera outbreak to date, a devastating cyclone, high inflation, and a shortage of foreign currency triggered by escalating import costs. As one of the world's least-developed nations, Malawi had previously depended on donors to cover approximately 40% of its budget. However, donor payments were suspended following the exposure of a state corruption scandal known as "Cashgate" in 2013. In addition to these challenges, Malawi is working to restructure up to $1 billion of external debt in order to qualify for funding from the IMF. IMF First Deputy Managing Director Gita Gopinath emphasized the importance of successful external debt restructuring, stating, "Successful external debt restructuring is vital as there is no reasonable mix of adjustment and financing alone that can deliver macroeconomic stability."

Malawi

IMF

Currency Devaluation

IMF loan