The International Monetary Fund postponed a planned mission to Malawi to allow further discussions on the treatment of its debt, Finance Minister Sosten Gwengwe said.
IMF staff had been due in the southern African nation this week for talks on a four-year Extended Credit Facility. Two years ago, newly elected President Lazarus Chakwera canceled an IMF program agreed by his predecessor to better align it with the country’s development strategy.
Talks about the new program are continuing, Gwengwe said. He denied a report in the local Daily Times newspaper earlier on Tuesday that discussions were suspended over a disagreement about the nation’s debt sustainability.
“Negotiations are still going on,” he said by text message. “There are no disagreements between Malawi and the IMF. The mission team is working hard for us, but agreement on how best and how deep our debt treatment should be is where we need to agree, hence the need to push forward the mission.”
Malawi needs IMF funding to help alleviate a foreign-exchange shortage that’s spawned a fuel crisis in the impoverished nation. The paucity of foreign currency forced the central bank to devalue the kwacha by 25% in May. Inflation has surged to 24.6%, from 11.5% at the start of the year.
Malawi is among dozens of low-income countries whose debt the IMF deems unsustainable, which restricts it from helping, IMF Managing Director Kristalina Georgieva said in an interview with CNBC TV-18 on Sept. 9. The fund’s policies bar it from bailing out countries with unsustainable debt, unless they have taken steps to restore it to viable levels. Creditors including China and private lenders must “move rapidly to provide debt relief” to enable the IMF to help revive low-income countries’ economies, Georgieva said.
Malawi’s total external debt stood at $3.64 billion at the end of March. Its foreign loans include $254 million from the Export-Import Bank of China, $1.57 billion from the World Bank and the IMF, and $460.7 million from the African Export-Import Bank, according to Finance Ministry data.
Gwengwe said that while the government thinks it has done enough to restructure its debt, “the IMF thinks more should be done.”
IMF Resident Representative for Malawi Farayi Gwenhamo didn’t respond to a request for comment sent by text message, while a call to her mobile phone didn’t connect.
The IMF said in June that Malawi’s ability to restore debt sustainability and resolving a case involving the misreporting of Reserve Bank of Malawi foreign-exchange reserves are prerequisites to the country receiving new funding.