IMF team to assess economic progress

An International Monetary Fund (IMF) team arrived in Malawi on Monday to assess whether to unfreeze US $47 million in vital aid to the country, news reports said. In May the IMF said it would withhold the US $47 million earmarked for Malawi under its Poverty Reduction Growth Facility due to government overspending beyond targets set by the Fund. The IMF board was due to have met in December to review Malawi's economic performance before authorising the release of the money. But, according to the news agency AFP, the meeting was postponed with the IMF telling the government to rectify "pressure points" in its current budget before lending could resume. Other key donors, including Britain, had reportedly linked the release of bilateral aid to a green light from the Fund. Finance Minister Friday Jumbe said the timing of the IMF's visit was "critical" because it would enable the Fund's team to review his latest budget. "We are confident the Fund will see major improvements made on our side," he told AFP. An estimated US $8 million was illegally siphoned off from the state budget to pay for non-existent workers, a report released this week by the Economist Intelligence Unit (EIU) said. "This has caused the fiscal deficit to increase and the government has thus failed to fulfil the conditionalities imposed by the IMF. Therefore, the government will have to rein in its spending in early 2003 if the IMF is to resume funding under Malawi's poverty reduction and growth facility," it noted. The EIU forecast that Malawi's total debt stock would increase to US $3 billion in 2003 and then fall to US $2.8 billion in 2004, if it met the criteria for debt relief under the IMF-World Bank's heavily indebted poor countries (HIPC) initiative. Malawi would only be offered HIPC relief when it successfully fulfilled the IMF's conditionalities under the poverty reduction and growth facility for at least a year, the EIU said.