The IMF merry-go-round, one more dance for Malawi?

Exactly 12 months after the unceremonious termination of the four-year $175 million (about K306 billion) Extended Credit Facility (ECF) with the International Monetary Fund (IMF), Malawi Government representatives are heading back to the boardroom to discuss a new programme with the Bretton Woods institution. It is worth highlighting that the new move as confirmed by Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha comes barely eight months after a change of guard at Capital Hill after President Peter Mutharika and Democratic Progressive Party (DPP) trounced former president Lazarus Chakwera and Malawi Congress Party (MCP) in the September 16 2025 General Election. The collapsed ECF failed because of fiscal slippages and challenges with the foreign exchange system.

In other words, the authorities failed to tame spending and manage the economy. This time around, the IMF mission is due in the country between June 9 and 18 for negotiations towards a new ECF. Yet another dance, I would say.

Reform efforts under the collapsed ECF focused on bringing back the country to a sustainable fiscal path, rebuilding external buffers, restoring debt sustainability and external viability while mitigating the effects of El-Nino-induced shocks. But by May 2025 when it collapsed, inflation remained high, foreign exchange scarcity worsened and public debt soared. For Malawi, macroeconomic stabilisation has always been the target in IMF deals.

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However, many times the targets are missed. In the past week, The Nation also reported that Malawi Government is engaged in discussions for a fuel financing facility to ease queues and debt restructuring with the Africa Export-Import Bank (Afreximbank). Treasury data show that Malawi owes Afreximbank about $610 million, making it the largest commercial creditor.

Total public debt estimated at K23 trillion while interest payments are projected to rise to K2.7 trillion this financial year, equivalent to about 43 percent of domestic revenues While they may not be the perfect tonic for treating an ailing economy like Malawi’s, traditionally, IMF programmes have the “signalling effect” of triggering direct budget support, although in recent years that impact has waned. This could also be attributed to Malawi’s ‘confidence deficit’ in the eyes of development partners coupled with legacy issues in the aftermath of Cashgate, the plunder of public resources at Capital Hill exposed in September 2013. For a long time, poor public finance management and weak oversight have distracted Malawi from achieving stability and growth.

The IMF supports member countries’ own programmes with advice and financing. In this regard, authorities are expected to develop the details of their macroeconomic adjustment programme by establishing strong ownership and demonstrating a track-record of policy implementation. The 2025 Article IV Staff Report offers some guidance on policy recommendations in the fiscal, monetary and financial, external and structural areas.” For Malawi, major obstacles to clinching a new ECF include the exchange rate policy.

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