News Brief: IMF Completes Review and Approves US$10.6 Million Credit Tranche for Malawi
October 25, 1999
US$10.6 Million Credit Tranche for Malawi
The International Monetary Fund (IMF) today completed the midterm review under the third annual arrangement under the Enhanced Structural Adjustment Facility (ESAF). As a result of the review, Malawi will now be able to access SDR 7.635 million (about US$10.6 million).
In summarizing the IMF Executive Board's discussion of the review, Shigemitsu Sugisaki, Deputy Managing Director, said:
"Directors noted that economic performance under the program supported by the third annual arrangement had been mixed. Real GDP growth was below the program target, and inflation while remaining high, had abated in recent months. The external position had improved, with official international reserves at adequate levels. While all the quantitative performance criteria and most of the benchmarks were observed at end-June, the fiscal position had recently come under pressure. Directors welcomed the corrective measures taken by the authorities to strengthen the fiscal position and implement key elements of their structural reform program.
"Directors recognized that Malawi has been unable to achieve sustained economic growth because of structural bottlenecks and its vulnerability to adverse external developments. They stressed that adherence to tight financial policies to control inflation and progress with structural reforms will be critical in achieving success and in accelerating the mobilization of committed external assistance.
"Directors underscored the need for a determined effort to achieve the fiscal targets set under the 1999/2000 budget. They welcomed the authorities' effort to rationalize the tax structure and speed up the preparation for the introduction of the VAT. Directors encouraged the authorities to continue to exercise strict control over expenditure and to give high priority to improving budget allocation for health, education and poverty reduction.
"Directors urged the authorities to accelerate the pace of structural reforms. In particular, they noted the need for accelerated reform of ADMARC, the civil service, and the privatization of state-owned enterprises. Directors urged the authorities to continue to continue to improve governance. They welcomed the authorities' plan to strengthen coordination among key economic institutions.
"Directors noted Malawi's high dependence on limited agricultural exports, its heavy external debt burden, and the need for continued strong support from the international community. They urged the authorities to continue to pursue a prudent debt management policy and to seek an early solution to the debt problem, including considering seeking assistance under the enhanced HIPC initiative," Sugisaki said.