Malawi receives loan to help with the world economic downturn

Malawi has received a loan from the International Monetary Fund. The loan comes from a reserve of funds that is doled out when a country is effected by economic events beyond it's control, like the world depression going on now.

This IRIN article that we found from Reuters details the loan and why the nation needed it.

Malawi - one of the world's poorest countries, but which is also enjoying one of the world's highest growth rates - was hit hard by high fuel and fertiliser costs that reduced its import cover to about five weeks in September 2008.

This was despite being "buttressed by the seasonal concentration of tobacco proceeds [a major foreign currency earner] in April-September," said the IMF Request for a One Year Exogenous Shocks Facility Arrangement Staff Report, published on 21 January.

On 3 December 2008 the IMF approved a one-year US$77.1 million loan, of which US$51.4 million was available immediately.

Although world oil prices have dropped sharply with the onset of a global economic downturn, "the negative effects of the earlier price hikes will persist over the next few months, because current imports of oil and fertilisers were contracted at earlier high prices," Takatoshi Kato, the IMF's deputy managing director and acting chair, said in a statement.

The ESF was modified in November 2008, making it easier for low-income countries to access the facility. Repayments begin five and half years after the money has been disbursed and the loan has to be repaid in 10 years at an interest rate of 0.5 percent.

Victor Mbewe, Malawi's Reserve Bank Governor, said in the capital, Lilongwe, on 19 December that although the global financial market crisis was unlikely to directly affect Malawi, it would "manifest itself in a reduced demand for our exports in the coming year [2009], which will in turn affect the country's economic growth and poverty reduction efforts."