The International Monetary Fund executive board on Monday approved the disbursement of $88.3 million to Malawi under the new “food shock window” emergency lending facility set up in response to spikes in food prices and shortages caused by Russia-Ukraine war.
The board also assessed that a previously approved staff-monitored policy program for Malawi linked to the food shock loan is “sufficiently robust to meet the stated objectives” and was expected to build a track record of policy implementation that could lead to a more formal IMF “upper credit tranche-quality” loan arrangement.
The food shock loan, part of the IMF’s Rapid Credit Facility, would assist the southern African nation tackle urgent balance-of-payments needs caused by rising cost of fertiliser, food import, falling currency.
“Malawi is facing a challenging economic and humanitarian situation, with foreign exchange shortages and an exchange rate misalignment leading to a sharp decline in imports including fuel, fertiliser, medicine, and food,” IMF Deputy Managing Director Bo Li said in a statement.
According to Li, while debt is sustainable on a forward-looking basis, risks to the program are high and it was important to swiftly implement a debt restructuring strategy.
“The credible process underway to restructure the authorities’ debt to commercial creditors, which in itself would restore debt sustainability albeit with high risk, is welcome,” Li said.