IMF: Malawi Fertilizer Deal Highlights Need for Governance Reform
The report also highlighted the need to address weaknesses in governance and institutions, as exemplified by recent concerns regarding a fertilizer deal.
WASHINGTON, D.C., UNITED STATES — The International Monetary Fund (IMF) has expressed concerns about a recent fertiliser deal in Malawi, saying that it highlights the need for governance reform in the country, writes Winston Mwale.
Although the IMF does not say which fertiliser deal it is referring to, recently, there have been several controversial fertiliser deals in Malawi, including a fertiliser deal with East Bridge of Romania.
“Addressing weakness in governance and institutions remain important priorities, as demonstrated by the recent fertilizer deal, which is concerning from a governance perspective. The authorities’ governance and procurement practices should be strengthened to avoid such incidents in the future,” said Mr. Bo Li, Deputy Managing Director, and Acting Chair.
The IMF report also highlighted the impact of Cyclone Freddy on Malawi's economic outlook for 2023, resulting in lower growth forecasts and higher inflation expectations.
Key risks identified include potential slippages in program implementation, delays in the ongoing external debt restructuring process, and the possibility of further external shocks.
While performance under the PMB has been mixed, the authorities are actively addressing challenges and remain committed to the agreed macroeconomic adjustment path and policy reforms.
The report emphasizes that steadfast implementation of the Staff-Monitored Program is crucial to restoring macroeconomic stability and establishing a track record that would support a prospective request for an Extended Credit Facility arrangement.
The IMF urged the Malawian authorities to prioritize successful debt restructuring, with a focus on reducing external debt service through the treatment of commercial and official bilateral debt.
The report stressed the importance of close cooperation between the authorities, creditors, and international development partners for the successful implementation of the debt restructuring strategy.
“Fiscal discipline, supported by a robust Public Financial Management (PFM) system and timely production of comprehensive fiscal reports, remains critical. Concerted effort by the authorities and other domestic stakeholders to prepare for fiscal financing challenges is important,” said Li.
“Price stability supported by fiscal consolidation is critical to prevent further erosion of purchasing power for those living in poverty and food insecurity. Rebuilding buffers is critically important to reduce Malawi’s vulnerability to external shocks.”
In conclusion, the IMF stated that the Management-approved Staff Monitored Program remains sufficiently robust and on track to achieve its objectives.