From Sierra Leone to Malawi: The IMF's decisions in Africa vary

Written by Ziad Abdel Fattah:

In a move reflecting the disparity in economic conditions between countries African continentThe International Monetary Fund has approved a new $211.5 million financing program for Sierra Leone to boost its ability to cope with climate shocks, while Malawi continued its negotiations with the Fund without reaching an agreement on a new financing package to support its struggling economy.

The International Monetary Fund announced on Thursday its approval of a new financing arrangement for Sierra Leone under a mechanism dedicated to supporting countries most vulnerable to the repercussions of climate change, with the aim of strengthening economic resilience and improving the country’s ability to cope with environmental disasters and extreme climatic conditions.

The IMF completes the third review of Sierra Leone's program

The IMF completed the third review of Sierra Leone’s Extended Credit Facility program, enabling an immediate disbursement of approximately $31.7 million to support the government’s efforts to maintain economic stability and promote fiscal reforms.

Negotiations without an agreement with Malawi

In contrast, the International Monetary Fund announced the conclusion of a technical mission to Malawi that lasted from June 9 to 18, during which its experts held discussions with the authorities on the economic situation and policy priorities for the next phase, without reaching a final agreement on a new financing program.

The IMF described the talks as “constructive,” confirming that discussions are continuing on a package of economic policies and reforms that could be supported through a new Extended Fund Facility arrangement.

Malawi faces severe economic crisis

Malawi is seeking new financial support to address a severe economic crisis characterized by double-digit inflation, a severe shortage of foreign currency, and increasing pressure on public finances.

Discussions between the two sides focused on a number of key issues, including strengthening fiscal discipline, ensuring the sustainability of public debt, and improving the management of foreign exchange reserves, as part of broader efforts to restore economic stability.

The last financing program Malawi received from the International Monetary Fund faltered after the government failed to complete one of the periodic reviews within the specified timeframe, which led to the suspension of funding after receiving an initial payment of only $35 million.

Economic challenges

Malawi faces mounting economic challenges, most notably high levels of public debt and declining external funding from donors. Finance Minister Joseph Mwanamvika announced last February that public debt had exceeded 901 TP3T of GDP, a level he described as “unsustainable” and placing significant pressure on the national economy.

This contrast between Sierra Leone and Malawi points to the different paths of economic reform on the continent, with the former having succeeded in securing new financing to support its economic stability and address climate risks, while the latter is still seeking agreement with the IMF on a reform program that would open the door to new international financing.