Malawi awaits decision on IMF aid programme revival


Malawi has yet to see whether its decision to devalue the kwacha will enable stalled loan negotiations with the International Monetary Fund (IMF) to resume, said the country’s central bank governor.

Malawi has devalued the kwacha by about 10 percent against the U.S. dollar to 165, although the new rate is still well short of the currency’s value on the black market, where it is worth around 185 to the dollar.

The IMF has been pressing the government to allow the currency to weaken but President Bingu wa Mutharika, a former World Bank economist, had previously rejected the calls, saying such a move would hurt the poor, Reuters reports.
“I am not sure whether what we have done is acceptable to them or not … but we have done this as Malawi and we would like to hear from them whether this is OK or not…,” central bank Governor Perks Ligoya told a news conference.

He said the devaluation was expected eventually to boost Malawi’s foreign reserves, currently equivalent to two months of import cover rather than the three months’ cover recommended by the World Bank.

The country’s GDP projections of 6.7 percent and 6.9 percent for 2011 and 2012 are likely to be revised downwards, however, Ligoya said.

IMF resident representative Ruby Randall was quoted in local media on Monday as saying the 10 percent devaluation was a step in the right direction.
“However the appropriateness of the magnitude of the adjustment will have to be evaluated within the context of a wider package of measures still to be unveiled,” Randall told the Nation newspaper, a local daily.

The IMF suspended the Extended Credit Facility with Malawi in June this year after the government failed to devalue the kwacha and implement public finance management reforms, among other reasons.