Malawi Finance Minister ‘optimistic’ of debt restructuring, new IMF loan by year end

By Frank Phiri

LILONGWE (Reuters) – Malawi’s finance minister said on Tuesday he was “very optimistic” that the country’s $1.2 billion external debt would be restructured and it would secure a new International Monetary Fund loan programme by the end of the year.

Malawi needs to get assurance letters from its “two main bilateral donors” China and India that they are on board with the debt restructuring process in order to secure the IMF loan, Sosten Gwengwe told reporters after meeting IMF deputy managing director Gita Gopinath in the southern African country.

Malawi owed the Export-Import Bank of China $222 million and the Export-Import Bank of India $114 million at the end of 2022, according to an IMF July report.

It also owes the African Export-Import Bank $495 million and Trade & Development Bank $337 million – both creditors have signed up to the restructuring, Gwengwe said.

“We are very optimistic,” he said, when asked if he thought Malawi would secure an IMF loan by the end of the year.

“But I should also hasten to say that yes, we’ve gone through a lot of difficulties the past two years, but it’s not over yet. We still need to continue walking the path.”

Landlocked Malawi, a net importer, is experiencing severe shortages of key imports such as fuel, medicines and fertilizers due to foreign currency shortages. This has resulted in long queues of motorists at fuel stations and robberies there.

The country secured an emergency $88.3 million IMF loan in November 2022 and is hoping to transition to an Extended Credit Facility (ECF) loan.

An IMF team has started virtual meetings with the government and a team will arrive in the next two-three days until around Sept. 18, Gwengwe said.

“The reform momentum must continue and this will be part of the discussions that the IMF team will have on the ECF,” the IMF’s Gopinath told reporters after meeting Malawi’s president.

(This story has been refiled to fix a typo in the headline)

(Reporting by Frank Phiri, Writing by Rachel Savage; Editing by Tomasz Janowski)