The International Monetary Fund said on Wednesday Malawi's economic programme under new President Bingu Wa Mutharika "seems to turn around a very difficult situation" after a record of poor performance.
Wa Mutharika, an economist by training, was handpicked by former president Bakili Muluzi and won elections in May, in a vote that was declared free by international observers. The Washington-based global lender halted loan payments to Muluzi's government after spending spilled outside the 2003-04 budget.
Since wa Mutharika's election, the fund has returned to the south-east African nation under a so-called IMF staff-monitored programme, which will include quarterly visits to assess if the government is sticking to economic targets. There is no lending under the programme.
"This programme will help the authorities establish a track record that can restore credibility in macroeconomic policy implementation," the IMF said in a report published on Wednesday.
It said the programme could lead to a more formal IMF poverty reduction and growth facility designed for low-income countries and that includes regular disbursements. The IMF said Malawi had made some progress last year in reversing its economic record.
But fiscal slippages, especially in March to May 2004, and a long record of poor policy performances have saddled the economy with inflation, high interest rates and depressed private sector investment.
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