Statement at the End of an IMF Staff Visit to Malawi

IMF News, March 14, 2019

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IMF team led by Pritha Mitra, Mission Chief for Malawi, visited Lilongwe from March 5-15, 2019.
Visit conducted discussions on the second review of the three-year arrangement for Malawi under the Extended Credit Facility (ECF) for SDR78.075 million or about US$112.3 million.
End-of-mission statement issued March 14, 2019.
Further discussions to continue in the weeks ahead, including in the context of the IMF’s Spring Meetings during April 12–14 in Washington, D.C.

“Malawi’s economic outlook is favorable.”
Growth projections:
- Economic growth is projected to reach about 5 percent in 2019 supported by a rebound in agriculture and some improvement in electricity generation.
- Over the medium-term, growth could rise further to 6-7 percent, driven by infrastructure projects—including electricity generation—crop diversification, greater access to finance, and an improved business climate.
Inflation projections:
- Inflation is expected to ease to around 8 percent at end-2019 and gradually converge to 5 percent over the medium term.

“Performance under the program has been good.”
Quantitative performance criteria (QPC) outcomes:
- All but one of the QPC for end-December were met.
- The target on the primary balance was missed largely due to front-loading of budgeted expenditures and increases in spending to hold elections.
Structural benchmarks:
- Two structural benchmarks were completed on time and most of the rest were met with a short delay.
- Delays were partly owing to capacity constraints in automating public finance management, which are being addressed.

Fiscal policy should continue to focus on actions to ensure fiscal sustainability.
Fiscal consolidation should be accelerated in the upcoming fiscal year (FY 2019-20).
Key reform areas:
- Improve debt management.
- Improve public financial management, including:
- Undertaking regular bank reconciliations.
- Improving commitment control and cash management.
- Enhancing the transparency of the budget process.
- Improve revenue administration.

Authorities have an ambitious plan for infrastructure projects aimed at supporting sustainable growth and poverty reduction.
Implementation priorities and risks:
- Ensure financing of infrastructure preserves debt sustainability and contains fiscal risks.
- Strengthen public investment management through rigorous prioritization of projects and an improved project management framework.
- Strengthen oversight and monitoring of state-owned enterprises and other parastatals to contain fiscal risks.

Monetary policy focus:
- Continues to focus on maintaining single-digit inflation.
Banking system resilience:
- Resilience is improving as reflected in reduced non-performing loans and increased provisioning.
Credit and access to finance:
- Credit to the private sector has increased.
- Structural barriers, such as challenges in property rights, must be addressed to sustainably increase access to finance.
Reserve Bank of Malawi (RBM) governance and operations:
- The newly adopted RBM Act has enhanced the RBM’s autonomy.
- As a next step, the RBM could continue gradually reducing its holdings of government securities.

Mission and authorities had productive discussions on the second review under the ECF arrangement; discussions will continue in the weeks ahead and at the IMF Spring Meetings (April 12–14).
The team met with Minister of Finance Goodall Gondwe, Governor of the Reserve Bank of Malawi Dalitso Kabambe, other senior government and RBM officials, a broad range of non-governmental stakeholders, and representatives from Malawi’s development partners.
The IMF team thanked the authorities for their warm hospitality, strong cooperation, and constructive discussions.

Statement by IMF staff at the end of a mission, March 14, 2019.