Economist Dr Betchani Tchereni has advised the Government of Malawi to increase the quota in the International Monetary Fund (IMF) for the country to achieve more benefits from the IMF resources.
Tchereni sounded the advice during a presentation at the study report validation workshop on Special Drawing Rights (SDR) utilization in Lilongwe on Wednesday.
The Malawi Economic Justice Network (MEJN) organized the workshop with funding from the Bill and Melinda Gates Foundation through African Forum and Network on Debt and Development (AFRODAD) through a project called, “Supporting Advocacy and Capacity building of African CSOs for increasing voices in the Special Drawing Rights agenda and wider debt issues at national, regional and global levels”.
Tchereni said there are indications that the disbursed SDRs might have been utilised on areas that were not purposed.
“Interviews with the IMF Malawi office and the Reserve bank revealed that SDRs are not necessarily allocated for a specific purpose. Normally, they are allocated to assist with the broader mandate of assisting economies to stabilise their macroeconomic fundamentals.
“The allocation of SDR disbursements based on the proportion of the membership was meant to supplement a country’s foreign exchange reserves and are generally managed through central banks in most countries,” he said.
He added, “Ultimately, they are used by the country to make foreign exchange payments which includes government debt repayments and importation of strategic commodities including fuel, fertilizer, pharmaceuticals.”
Tchereni further revealed that just like any other foreign reserves, the Reserve Bank of Malawi (RBM) used the reserves to pay-off some loans, which were maturing at the time of the disbursements.
He stated that that if it was not for this allocation, Malawi would have defaulted on such maturing loans, which would have worsened its credit worthiness especially for possible future disbursements.
“Specifically therefore, the allocated SDRs allowed the country to build reserves and improve to be able to import strategic commodities,” he narrated.
MEJN Executive Director Bertha Phiri said the study commissioned the study to understand the utilization of SDRs at local level and also explore possibilities of advocating for reallocation.
Phiri added that the project is advocating for the rechanneling of the same in a manner that strengthens the provision of public goods and services while at the same time lessening the pressure on unsustainable debt burden arising from over borrowing both domestically and foreign.
“It is against this background that MEJN has organized a validation workshop where the study findings will be shared with partners for the effective inputs,” she said.