The International Monetary Fund (IMF) and the Government of Malawi began a round of negotiations on Monday, November 3, in Lilongwe, the country’s capital, to seek consensus on a possible resumption of financing through the Extended Credit Facility (ECF).
The IMF ended its four-year extended credit program with Malawi in May 2025 due to the government’s inability to comply with agreed fiscal measures and unsustainable external debt.
The country had only accessed a small portion of the $175 million in financing before the program was closed.
The five-day negotiations will focus on ending the fixed exchange rate, allowing for a more flexible, market-determined rate, which in Malawi’s case could be largely achieved through depreciation and subsequent fluctuation to help maintain macroeconomic stability.
For the multilateral lender, this measure would help the economy absorb shocks while rebuilding foreign exchange reserves. However, the government of Peter Mutharika argues that it could drastically raise prices and worsen inflation. The IMF is also pressing for revenue-focused fiscal adjustment to build credibility, strengthen equity and self-sufficiency, control spending, reduce public debt vulnerabilities, and support investment and disinflation.
The institution has already demanded full implementation of the Integrated Financial Management and Information System across all government agencies, reduction of economic distortions, adoption of a strict tax regime for mining, elimination of regulatory burdens, implementation of central bank safeguard recommendations, and continued governance and transparency reforms.
Economic analyst Sylvester Malumba noted that Malawians should expect these strict conditions, as IMF support comes with reform targets that must be met.
Public debt equivalent to nearly 88% of GDP makes achieving a sustainable macroeconomic trajectory challenging for the country.
The meeting in Malawi comes shortly after the IMF held “productive discussions” with the new Malawian government during its annual meetings in Washington.
Source: Rádio Moçambique
