(Bloomberg) --

Malawian President Lazarus Chakwera expects to clinch a new financing deal with the International Monetary Fund by early next year to help kick-start an economic revival in the landlocked southern African nation. 

“We are actually at the tail end of our discussions with the IMF,” while a meeting with the World Bank is scheduled for next week, Chakwera said in a teleconference interview from Lilongwe, the capital, on Thursday. “In terms of a specific program, a credit facility with the IMF, then we are talking about four to six months.”

One of the world’s least-developed countries, Malawi relied on the U.K. and other donors to fund about 40% of its budget before they halted payments after a state corruption scandal dubbed “Cashgate” was exposed in 2013. While talks with the donors are ongoing, aid flows haven’t resumed, leaving the government little leeway to stimulate economic growth and employment following the onset of the coronavirus pandemic. 

Malawi’s accumulation of about $6 billion of debt is “choking the life out of an economy like ours,” with a large proportion of the budget going toward interest payments and civil-servant wages, Chakwera said. The government is investigating the option of reorganizing or rescheduling all its loans, a large component of which are owed to banks, and once that process is complete it will consider other funding options both locally and abroad. 

Engaging Creditors

“We are talking with those we borrowed heavily from and we are negotiating with them,” the president said. “We want to see what advice they can give, what IMF advice can be proffered to us, and then we will take it from there.”

A preacher who heads the Malawi Congress Party, Chakwera took power in June last year after winning a rerun of an election that was annulled by the nation’s Constitutional Court on the grounds that it was rigged in favor of then-incumbent Peter Mutharika. 

The pandemic has tempered his ambitions of almost doubling the economic growth rate to at least 7%, with gross domestic product expanding just 0.9% last year. The rate is expected to exceed 3.9% for 2021, Chakwera said. 

The $9.3 billion economy is heavily reliant on agriculture, with tobacco the largest export. The country is Africa’s biggest supplier of the burley variety of the crop used to fill cigarettes rather than flavor them. Tourism, another main source of revenue, has been hit hard by the pandemic. 

“Covid-19 has not helped matters, like everybody else we have been affected,” Chakwera said. “We have a recovery program and we are launching that this coming month in order for us to focus on those areas that will need to be emphasized,” such as creating jobs and ensuring there is food security, he said. 

A new unit is being set up in the presidency to ensure key policies are quickly and effectively implemented, while the government is focusing on attracting private investment and managing state resources more prudently.

Other Highlights: 

  • Donors have been supportive of the government’s reforms and plans to revive the economy.
  • The government is following through on its pledge to tackle corruption, and law enforcement agencies and the courts have the mandate and independence to recover stolen funds and hold those responsible to account.
  • Malawi wants to produce more clean energy, with solar, hydropower and wind plants under consideration and the government is investigating concessional financing options.
  • A government program to ensure farming inputs are affordable has helped contain food inflation and mitigated against the impact of Covid-19.

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