MALAWI: IMF to help with maize shortfall

Photo: US Embassy in Malawi

President Mutharika's government commended for fiscal discipline

JOHANNESBURG, 10 May 2005 (IRIN) - The government of Malawi has requested financial assistance from the international community to address an expected maize shortfall, according to the International Monetary Fund (IMF). Following consultations in Lilongwe, the IMF said in a statement that it was "working with the Malawian government, international donors and the World Bank to identify ... resources" to fill the expected food gap. IMF resident representative Thomas Baunsgaard commented that "government and the donors are still discussing how much assistance should be given". Like several other countries in Southern Africa, Malawi has experienced prolonged dry spells at critical points in the crop development cycle and now faces the prospect of widespread food shortages. The office of the UN Resident Representative in Malawi said results from the latest crop assessment, released by the Ministry of Agriculture on 1 April, pointed to "impending hunger". Maize production forecasts are 24.6 percent below last year's poor harvest, while prolonged drought conditions have reduced the sweet potato harvest by 12.8 percent and foreign currency earning tobacco by 12.5 percent. An IMF mission visited Lilongwe, the capital, from 19-29 April to review Malawi's performance under the staff monitored programme (SMP) and hold discussions on the possible resumption of a Poverty Reduction and Growth Facility (PRGF) - the IMF's concessional loan scheme to poor countries. "The mission reached tentative understandings with the government on a macroeconomic framework and policies that would be covered under a PRGF arrangement. Talks on a macro-framework for 2005/06 fully accommodated the substantial scaling-up of resources for the health sector, and government maize purchases for humanitarian and buffer-stock purposes," the Fund noted. It said Malawi's performance under the SMP had "remained strong" and "all key quantitative performance criteria were met, with the exception of an overrun on the government payroll that stemmed from the civil service pay reform undertaken in October 2004". "The costs of the wage reforms were initially underestimated because of the complexity of the old [pay] system," the IMF explained. Despite this, "the overall performance under the SMP reflects a high degree of commitment by the government to adhere to its budget. This is a noteworthy turnaround from the experience in previous years." The IMF mission also noted the "good progress" made by the government in upgrading government expenditure controls during the current fiscal year.