Thursday, 5 December 2013

Malawi and the IMF, 2013 edition

Africa Check - a Southern African fact checking group - has suggested that the smiles and happy reports coming out of Malawi about the IMF's recent mission to the country may be overly optimistic. Malawi is in hot water after an accounts assistant appears to have succeeded in stealing K120 million, precipitating a suspension of some donor support - both dramatic and problematic for a country dependent on donor funds for 40% of its budget. Donors wanted the IMF's assurance that the country was on track to fix the problem, so the IMF sent a mission. After the meetings, the Presidency of Malawi announced that
the IMF had welcomed President Banda’s commitment to economic reform and hailed initiatives made immediately after she took office in May 2012 including the introduction of a flexible exchange rate and the automatic adjustment mechanisms of fuel prices 
Africa Check points out that the IMF actually said that
“Preliminary indications are that full and vigorous implementation of these remedial measures will lead to the return of some budget support, but still leave a sizeable fiscal gap.”
This gap will need to be met by spending cuts, it warned.
Spending cuts are bad for Malawi. The country's poor sit far too close to the edge of major crisis, with fragile livelihoods, mostly dependent on smallholder farming in a context where land is getting more scarce, soil fertility is declining and markets are poorly organised and unpredictable, and rainfall is not at all consistent. Not long ago fuel and food price increases drove the populace to a rare spate of demonstrations and protests. Banda's decision to devalue the Kwacha hasn't brought down prices. 

Depending on the IMF's opinion and recommendations to get back the aid they so desperately need must be particularly galling for Malawi, where the IMF's recommendations contributed to (some say were solely responsible for) a famine in the country just a decade ago. 

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