IMF deadlock over fresh ECF

Malawi and the International Monetary Fund (IMF) remain locked in discussions over a fresh Extended Credit Facility (ECF) programme, with the country pushing for a bigger financial package that can make a meaningful impact on its foreign exchange crisis, a source privy to the talks has said.

The source, who spoke on condition of anonymity, said, currently, Malawi’s main concern is not the reforms attached to an IMF programme but, rather, the magnitude of the support that comes with it.

The source said Malawi believes that the previous funding level was not enough to address the country’s balance of payment problems.

“The issue is how much the fund can provide under the programme. The last ECF was about $175 million, which was too little compared to Malawi’s balance of payment challenges.

“Even the $175 million is not a quarter of what is circulating in the banking system. Malawi’s quota at the IMF is also very small,” the source said.

The source said, during recent discussions, IMF officials requested for information on the amount of foreign exchange available in commercial banks as they considered Malawi’s request for increased financing.

Malawi also told IMF officials that the framework for a new programme should be developed locally rather than being entirely designed by the Bretton Woods institution.

“The argument is that reforms must respond to Malawi’s own challenges. They should be a homegrown solution,” the source said.

The IMF is understood to have asked for ample time to study Malawi’s request for increased funding.

The source said the fund was exploring possible ways of adjusting support without necessarily changing the country’s quota allocation.

The source added that the IMF was satisfied that Malawi had made progress on several previous commitments, which had reportedly encouraged IMF officials to continue discussions on a new programme.

One example is the Malawi Revenue Authority (MRA), which has continued meeting monthly revenue collection targets.

However, the source said the major disagreement remained on whether reforms alone could solve Malawi’s economic crisis when businesses and individuals continued struggling to access foreign currency.

The source said exporters travelling outside the country could access foreign currency through international channels, including automated teller machines, but some of the money returns into the informal market, worsening pressure on the formal foreign exchange system.

Treasury and IMF officials are expected to continue discussions later this month before the fund’s annual meetings.

Treasury spokesperson Williams Banda said the government would continue engaging the IMF while pursuing other measures to improve foreign exchange availability.

He said the government was also exploring other sources of support, including donor-funded projects, while working on locally developed solutions to address issues related to foreign exchange shortages.

“What I can say is that we have been meeting the IMF and we will continue to engage them.

“However, we are enhancing efforts in procurement of gold for sale to replenish foreign exchange reserves,” Banda said.

The IMF has already confirmed that discussions are ongoing with the Malawi authorities on a possible new ECF arrangement after a mission visited the country to assess economic developments and policy priorities.

In a recent interview, IMF Resident Representative Yugo Koshima said sustained efforts would be needed to stabilise the Malawi economy as discussions continue on a possible ECF programme, with talks focusing on macroeconomic stability and a package of policies and reforms that could be supported under the arrangement.

The IMF approved a four-year ECF arrangement for Malawi, amounting to about $175 million, in November 2023, with the immediate disbursement of about $35 million.

The programme was expected to support economic reforms, rebuild reserves and restore macroeconomic stability.

However, the programme failed to progress after Malawi did not complete required reviews.

The IMF later confirmed that the arrangement automatically terminated on May 14, 2025 after 18 months without a completed review.

The fund attributed the challenges to difficulties in maintaining fiscal discipline, weak revenue mobilisation, foreign exchange shortages and unresolved debt issues.