Statement at the end of an IMF Staff Visit to Malawi
March 24, 2020
End-of-Mission press releases include statements of IMF staff teams that
convey preliminary findings after a visit to a country. The views expressed
in this statement are those of the IMF staff and do not necessarily
represent the views of the IMF’s Executive Board. Based on the preliminary
findings of this mission, staff will prepare a report that, subject to
management approval, will be presented to the IMF’s Executive Board for
discussion and decision.
- With the evolution of the COVID-19 outbreak still largely unknown, the economic outlook is subject to substantial uncertainty.
- Prospects for the remainder of the year will depend on the extent of transmission to Malawi of COVID-19 and the magnitude of associated global and regional economic spillovers.
- Expenditures have appropriately been increased to cover the cost of the upcoming election and to finance urgent health care preparations consistent with the government’s COVID-19 contingency plan developed with support from the WHO and other development partners.
An International Monetary Fund (IMF) team led by Pritha Mitra, Mission
Chief for Malawi, held a mission during March 10-23, 2020, to conduct the
2020 Article IV Consultation and hold discussions on the fourth review of
the three-year arrangement for Malawi under the Extended Credit Facility
Press Release No. 18/157
). Discussions were held in Lilongwe, Blantyre, and by video-conference
from Washington D.C.
At the end of the mission, Ms. Mitra issued the following statement:
“With the evolution of the COVID-19 outbreak still largely unknown, the
economic outlook is subject to substantial uncertainty. The recent strong
agricultural harvests and reconstruction activity after Cyclone Idai have
boosted growth, but the growth path for the remainder of the year will
depend on the extent of transmission to Malawi of COVID-19 and the
magnitude of associated global and regional economic spillovers.
Notwithstanding the effects of COVID-19 on the economy, over the
medium-term, growth may rise further to 6-7 percent, backed by
infrastructure that is more resilient to shocks from climate change,
improved access to finance, crop diversification, and an improved business
climate. Inflation is anticipated to decline from 11.5 percent at end-2019
to 9.3 percent at end-2020, as elevated food inflation moderates, and
gradually converge to 5 percent over the medium term. The key risk is the
potential for deeper disruption to economic activity in Malawi from the
spread of COVID-19.
“The authorities regained control over the budget in the first half of FY
2019/20, but maintaining this performance for the second half of the fiscal
year will be challenging. Pressures from COVID-19 and political
uncertainties ahead of the new Presidential elections are weighing on
revenues. At the same time, expenditures have appropriately been increased
to cover the cost of the upcoming election and to finance urgent health
care preparations consistent with the government’s COVID-19 contingency
plan developed with support from the WHO and other development partners.
“The authorities are deploying measures to enhance spending efficiencies
and address revenue shortfalls in the current fiscal year and they expect
to shift to a positive domestic primary balance in the coming years. They
are committed to repaying arrears accumulated in recent years and
addressing shortfalls in the system that led to them. The government will
continue enhancing tax policy and revenue administration. Strengthening
transparency in the budget process, the medium-term budgetary framework,
cash management, and routinized bank reconciliation as well as gradual
upgrading of the existing public financial management system will be
“Monetary policy remains focused on preserving price stability over the
medium-term. Banking system resilience continues to improve, with
non-performing loans (NPLs) declining over the last three years and
improved provisioning. Credit to the private sector has picked up in recent
months but sustainably increasing access to finance will require addressing
structural barriers, such as challenges with the collateral registry,
mobile banking, and property rights.
“The Malawi Growth and Development Strategy (MGDS) III envisages
significant improvements in building resilience to climate change,
productivity and competitiveness which will unlock private sector
potential. To this end, the authorities will continue to implement
large-scale infrastructure projects, while preserving debt sustainability.
Malawi’s debt has risen but both its external and overall risk of debt
distress remain “moderate.” To reduce risks and benefit from more efficient
and better quality spending, it will be important to improve public
investment management, oversight and monitoring of state-owned enterprises
and other parastatals, and debt management.
“The mission and the authorities had productive discussions on the 2020
Article IV Consultation and the fourth review under the ECF arrangement.
These discussions will continue in the weeks ahead as the impact of the
COVID-19 outbreak on Malawi become clearer.
“The team held meetings with Minister of Finance Joseph Mwanamvekha,
Governor of the Reserve Bank of Malawi (RBM) Dalitso Kabambe, other senior
government and RBM officials, a broad range of national stakeholders
outside government, as well as representatives of Malawi’s development
partners. The IMF team thanks the authorities for their warm hospitality,
strong cooperation, and constructive discussions.”
The ECF is a lending arrangement that provides sustained program
engagement over the medium to long term in case of protracted
balance of payments problems.
IMF Communications Department
PRESS OFFICER: Meera Louis
Phone: +1 202 623-7100Email: MEDIA@IMF.org