For breaking news and analysis on Malawi and other stories of interest that impact on Africa

Malawi asks for new IMF aid programme

By Mabvuto Banda

WASHINGTON (Reuters) – Malawi has requested a new financing program from the International Monetary Fund necessary to unlock needed aid from Western donors, a senior IMF official said on Friday.

The IMF’s mission chief to Malawi, Tsidi Tsikata, told Reuters discussions on IMF support had begun on the sidelines of meetings of the IMF and World Bank in Washington.

He said an IMF mission would travel to Malawi before the end of May to discuss details of an economic program, which would be supported by an IMF loan.

The IMF had suspended a three-year $79 million loan after the program went off track when the government failed to devalue its kwacha currency and implement public finance management reforms.

“We should be going back to Malawi in a matter of weeks, at least before the end of May … but what we need is some clarity on the 2012/13 budget and we want to give the authorities some time to do that,” Tsikata said.

“We know how quickly Malawi wants the program but what is important to us is the formation of the budget,” he added.

Malawi’s new president, Joyce Banda, a prominent women’s rights campaigner, was sworn in earlier this month after the sudden death of President Bingu wa Mutharika, 78, from a heart attack, raising hopes for a fresh start for the aid-dependent country.

Mutharika was blamed for an economic crisis that stemmed from a diplomatic dispute with Britain. After clashing with Mutharika over his economic policies and heavy-handed repression of dissent, Britain and other donors froze aid worth some 40 percent of government spending.

An IMF program will likely help free up aid from the United States and Britain worth nearly $1 billion.

The country has not received budget support from donors since January last year, creating a budget gap of $121 million in the current fiscal year which ends in July.

Pressure has also been building on its currency, forcing authorities to devalue by 10 percent last year. The IMF has said too much of the state’s precious foreign currency reserves are being used to defend the kwacha.

Banda’s first goal since taking office earlier this month has been to restore the confidence of donors.

“The president has expressed her desire to work with us to return to a path of macroeconomic reform and we very much look forward to doing that,” said Antoinette Sayeh, IMF director of the IMF’s Africa Department, told Reuters on the sidelines of the IMF-World Bank meetings.

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