The International Monetary Fund (IMF) has terminated its four-year $175 million (about K306 billion) Extended Credit Facility (ECF) to Malawi. This follows Malawi’s failure to meet the compact’s agreed conditions.
In an online update, IMF said in accordance with its financing policies for low-income countries, Malawi’s ECF automatically terminated on May 15 as no review was completed over an 18-month period. The Bretton Woods institution added that although the ECF arrangement has expired, it was engaged in Article IV consultations with the Malawi Government.
“The IMF continues to work with the authorities in other ways within its mandate to support Malawi. This includes providing technical assistance to help modernise Malawi’s economic policies, strengthen its institutions and their capacity to implement reforms,” reads the update which also indicate there are “a range of tailored financing tools are still available to give Malawi some breathing room to adjust policies in an orderly manner.”
Meanwhile, Malawi Government has refused to describe the collapse of the facility as failure, arguing the decision is a mutual resolve between the two parties.
Betchani: It is a mutual resolve
In a statement, Secretary to the Treasury Betchani Tchereni: “The programme faced a number of exogenous shocks which made it difficult for the supply side to assist both increased revenue and enhanced production. This resolution allows the political environment necessary for the progression of the ECF programme to normalise as is expected after the elections in September 2025, thus enabling government to leverage its fresh electoral mandate in negotiating a more sustainable Extended Credit Facility package for Malawi’s macroeconomic stability going forward.”
The suspended facility followed a September 2023 review in which IMF and Malawi agreed a four-year ECF programme to replace the Staff Monitored Programme with limited board involvement that expired in October 2024. Malawi then requested an ECF facility.
Key issues in the suspended programme were to bring back the country to a sustainable fiscal path, rebuilding external buffers, restoring debt sustainability and external viability, including mitigating the effects of El-Nino-induced shocks.
Few weeks after President Lazarus Chakwera won the 2020 elections, the government cancelled an existing IMF facility and requested a new one. This led to the forfeiture of $70 million and total access under the cancelled three-year ECF was about $145 million, including the initial $112.3 million approved in April 2018 plus $40 million under Augmentation of Access approved in November 2019.
Chakwera: Conditions not feasible
Speaking at Mzuzu University graduation ceremony this week, Chakwera said the conditions set for the compact were not feasible looking at the challenges Malawi is facing and the need for among others to raise salaries for civil servants to match the inflation. His government recently approved a 40% salary increment to civil servants.
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