The International Monetary Fund, IMF, has announced the termination of Malawi’s $175 loan program. The announcement came on Wednesday following what the IMF described as lack of proper review.
Prior to the termination, Malawi had only received an initial disbursement of $35 million under the four-year Extended Credit Facility approved in November 2023.
Confirming the cancellation of the facility, the IMF said there had been no review over an 18 month period, raising questions about the transparency of the money.
Also, IMF said that the program has not been able to restore macroeconomic stability while the country’s foreign exchange system had made it difficult to rebuild international reserves.
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It also noted that external debt remained unsustainable because it had not been fully restructured. It added “Fiscal discipline has proven difficult to maintain in the current environment due to elevated spending pressures and insufficient revenue mobilisation efforts,”
The cancellation of this loan facility could spell doom for Malawi as the country grapples with high inflation, ballooning debt profile and a weak currency.
At the moment, inflation is running at over 30% in annual terms, while crippling foreign exchange shortages have affected key imports such as fuel and fertiliser.
In reaction to loan cancellation, Malawi’s finance ministry said the government would seek to negotiate a new IMF package after the September general elections.
