BLANTYRE: The International Monetary Fund (IMF) reached an agreement with Malawi for a new loan of about $174 million to help the debt-saddled southern African country recover from a series of shocks, including a devastating cyclone in March.
The 48-month staff-level agreement under the Extended Credit Facility needs to be approved by the IMF’s executive board, whose sign-off is contingent on Malawi’s external creditors committing to restructuring its debts, the IMF said on Thursday.
Malawi’s Finance Minister Sosten Gwengwe said earlier this month he was optimistic that $1.2 billion of external debt would be restructured.
Gwengwe told reporters on Thursday negotiations with the IMF and other lenders were protracted, but that he was happy to achieve the desired outcome.
The IMF board is to consider the loan in mid-November.
“The (Malawian) authorities continue to pursue good faith negotiations with commercial and official bilateral creditors and are in arrears on commercial debt while these discussions continue,” said IMF mission chief for Malawi Mika Saito.
In a July report, the IMF said Malawi was paying back its debts to the African Export-Import Bank (Afreximbank), which it owed $495 million at the end of 2022, and was in arrears to Trade & Development Bank, which it owed $337 million.
The IMF classes both lenders as commercial. Pan-African trade financier Afreximbank has disputed its categorisation, as it wants to be classed as a multilateral lender whose loans do not get restructured.
One of the poorest countries in the world, landlocked Malawi has severe shortages of fuel, medicines and fertilizers due to foreign currency shortages. This has resulted in long queues of motorists and robberies at fuel stations.
Key among the IMF’s expectations is for Malawi to achieve single-digit inflation by the end of the loan programme, Gwengwe said. Annual inflation was 28.6% in August, up from 28.4% in July.
China and India are Malawi’s two main bilateral lenders. Malawi owed the Export-Import Bank of China $222 million and the Export-Import Bank of India $114 million at the end of 2022, according to the IMF July report.
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