IMF approves credit to ease food shortages

The International Monetary Fund this week approved a US $23 million emergency credit to Malawi to finance food imports to help ease shortages threatening 3.2 million people. But the IMF said it would continue to withhold US $47 million earmarked for Malawi under its Poverty Reduction Growth Facility, due to government overspending. If the government stuck to its economic targets, a decision would be made to release the funds in December, the IMF said. Earlier this year, Malawi experienced a severe food crisis brought on by two years of poor harvests and the controversial sale of national grain stocks. In the weeks leading up to the meagre harvest, malnutrition levels rose alarmingly, with families selling their assets to buy maize, and scouring their surroundings for wild food. In a statement on Tuesday, the IMF said it recognised decisive action was required, and the credit would be used to boost Malawi's foreign reserves. "Malawi is facing a serious food shortage ... Our emergency assistance is a step toward helping the nation deal with its current food needs," said IMF Managing Director Horst Köhler. The IMF's emergency loan is subject to interest of 2.96 percent. Malawi must import 350,000 mt of commercially sourced maize, augmented by 210,000 mt of food aid, to cover its food deficit until the next harvest in March/April. Malawi has battled to secure funding from traditional donors. Last month, the European Union asked the government to return at least US $8 million in development aid because it had allegedly mismanaged money earmarked for a road construction project.