Malawi, IMF Reach Staff-Level Agreement

The Malawian government on Friday reached a staff-level agreement with the International Monetary Fund (IMF), a milestone that would help address the country's economic challenges.



"We had fruitful discussions and they [IMF] were quite impressed with the good economic initiatives that we have put in place since taking over government," Finance Minister Goodall Gondwe told The Anadolu Agency by phone.



In a statement released in the capital Lilongwe, IMF Mission Chief for Malawi Oral Williams said Malawi is yet to restore financial controls and accountability in the face of cashgate – a scandal in which government officials and civil servants were involved in the theft of some $100 million in public funds.



The scandal has prompted international donors to withhold aid to Malawi.



"The mission and the Malawian authorities reached staff-level agreement on policies that could be supported under the ECF [Extended Credit Facility]," said Williams, who was leading an IMF team that visited Malawi between December 10 and 17.



"To this end, policies geared toward bringing inflation down to single digits and increasing reserve coverage over the duration of the program were central to discussions," he said.



The ECF is the IMF's main tool for medium-term financial support to low-income countries.



It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality.



Financing under the ECF currently carries a zero interest rate, with a grace period of five and a half years, and a final maturity of 10 years.



The IMF nod means that Malawi could receive a grant of $20 million on approval of the bank's Board of Directors, according to the Ministry of Finance.



"The staff-level agreement is subject to review by the IMF's management and its Executive Board. Consideration by the Executive Board is expected in early 2015," said Williams.



The IMF team held discussions with a host of Malawian officials, including President Peter Mutharika, Finance Minister Gondwe, Reserve Bank Governor Charles Chuka and Secretary to the Treasury Ronald Mangani.



"The mission expresses its gratitude for the constructive spirit in which discussions were held," Williams said.



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