Press Release No. 05/98

Press Release: Statement by IMF Staff Mission to Malawi

May 9, 2005

The following statement was issued today in Lilongwe after a visit by a staff mission from the International Monetary Fund (IMF):

"An IMF mission visited Lilongwe during April 19-29 to review Malawi's performance under the Staff Monitored Program (SMP) through end-March. The mission also continued discussions on policies that could be supported under a Poverty Reduction and Growth Facility (PRGF) arrangement.

"The performance under the SMP remained strong through end-March. All key quantitative performance criteria were met, with the exception of an overrun on the government payroll that stemmed from the civil service pay reform undertaken in October 2004. The costs of the wage reforms were initially underestimated because of the complexity of the old system. The overall performance under the SMP reflects a high degree of commitment by the government to adhere to its budget. This is a noteworthy turnaround from the experience in previous years.

"The mission reached tentative understandings with the government on a macroeconomic framework and policies that would be covered under a PRGF arrangement. Talks on a macro framework for 2005/06 fully accommodated the substantial scaling-up of resources for the health sector and government maize purchases for humanitarian and buffer stock purposes. Structural economic policy discussions were anchored by the objectives of the Malawi Poverty Reduction Strategy, the Malawi Economic Growth Strategy, and measures to strengthen public expenditure management. The IMF mission noted the good progress made by the government during the current fiscal year in upgrading government expenditure controls.

"The government of Malawi has requested financial assistance from the international community to address the maize shortfall. The IMF is working with the Malawian government, international donors, and the World Bank, to identify these resources."