Economic observers have sharply criticized the International Monetary Fund (IMF) for attaching heartless, unrealistic and inhuman conditions to Malawi’s Extended Credit Facility (ECF). The demands, including fuel price hikes, wage cuts, and a freeze on public sector hiring, are seen as completely out of touch with the realities on the ground and as a recipe to further crush the already suffering Malawians.
Critics argue that these policies would only deepen poverty, increase social unrest, and inflict further suffering on an already struggling population.
Malawi’s relationship with the IMF hit another major snag this week after the country’s $175 million ECF bailout program came to an abrupt end on Malawi’s request.
In an interview with BBC World Service, Minister of Finance Simplex Chithyola Banda defended the government’s handling of the IMF deal, claiming that the program’s termination wasn’t a failure—but a mutual agreement to pause the deal until after the country’s September 2025 elections.
“We had written the IMF asking for cessation of the program,” he said. “Some of the prior actions and structural benchmarks were simply unrealistic and could hurt Malawians badly if implemented now.”
Listen to the Minister’s BBC interview here:
Among the IMF’s conditions were: raising fuel prices, which could have worsened the current inflation; freezing public sector hiring, risking a collapse in service delivery; and cutting salaries and wages, which would have demoralized civil servants and further strained the already overstretched government workforce.
“These are not things you impose on a country just months before a national election,” the Minister argued. “It would have caused more pain than progress.”
The ECF is a long-term financial support program for countries facing balance of payment problems. It is meant to help stabilize a country’s economy in exchange for tough reforms, usually around public spending, currency controls, subsidy reductions, and structural reforms to boost economic growth.
Malawi first entered the current ECF in 2022.
Following the termination of the programme some opposition leaders took it as an opportunity to misguidedly criticize government.
A local economist described the IMF conditions as a classical example of when help hurts and crushes the same people meant to be rescued.
“This is economic apartheid. You can’t help a country by prescribing wage cuts which could in a way demotivate productivity, no hiring, fuel hikes and the like. IMF is pushing government and the whole country to the edge. IMF’s demands could break Malawi’s backbone,” he said.
Chithyola Banda also pushed aside all criticisms, saying the situation on the ground forced the government to choose between macroeconomic theory and practical social obligation.
“You can’t build foreign exchange reserves when fuel stations are dry,” he said. “That would mean queues of cars, halted public services, and possibly unrest.”
Despite the IMF pulling back, the government received good news this week when the World Bank approved $350 million in support of Malawi’s energy infrastructure—particularly the Mpatamanga Hydro Project.
“This is nothing but a show of trust and confidence from development partners,” said Chithyola Banda.
The new grant will help expand Malawi’s energy generation capacity, a crucial component for industrialization, job creation, and reducing reliance on expensive fuel imports.
Although the current IMF program is suspended, talks are not entirely off the table. The IMF is expected to send a mission team to Malawi later this month to assess the situation and possibly lay the groundwork for a new deal post-election.
Chithyola Banda remains optimistic.
“We’ve completed many of the policy reforms required. What we haven’t done is due to the unique political and economic pressures of an election year. We’ll return to the table in September with realistic targets,” he said.
The core issue here is the tension between global lenders’ economic prescriptions and local political realities. While the IMF wants tight budgets, Malawi—like many developing nations—has to juggle fragile public services, a volatile economy, and upcoming elections.
Malawi’s case isn’t unique. Many African nations find themselves under similar pressure to meet external demands that don’t always align with internal needs. The result? Programs like the ECF often fail—not because of bad intentions, but because they require economic pain that governments cannot politically or ethically enforce at certain times.
Malawi’s second failed IMF program in five years might indeed be a serious concern. But it’s not the end of the road. With World Bank support still intact and renewed negotiations expected after the elections, there’s still a path forward—provided the next deal is based on realistic conditions and a shared understanding of Malawi’s domestic challenges.
As Minister Chithyola Banda put it: “We are committed to fiscal discipline—but we must also take care of our people.”
Also listed to Principal Secretary Dr. Betchani Tcheleni commenting on the termination of the ECF:
