IMF Executive Board Approves a US$91 Million Disbursement under the Rapid Credit Facility for Malawi

IMF News, May 1, 2020

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Canonical URL: IMF Executive Board Approves a US$91 Million Disbursement under the Rapid Credit Facility for Malawi

Purpose: To help Malawi meet the urgent balance of payments (BOP) needs stemming from the COVID-19 pandemic.
Rationale: The deteriorating macroeconomic outlook and policy responses to mitigate the impact of the pandemic are creating an urgent BOP need.
Role of IMF financing: To help fill part of the external financing gap and catalyze other concessional financing.

The pandemic is expected to have a significant impact on Malawi, including affecting the near-term economic outlook, which has deteriorated significantly.
Transmission channels cited: spillovers from the sharp global slowdown, economic disruption in the region, impacts on international trade, tourism, remittances, investment, and consumption.
Domestic containment measures: The national lockdown introduced to contain the pandemic has also impacted the near-term economic outlook, with large uncertainties surrounding the duration and spread of the pandemic.

The authorities have proactively responded with a national response plan—supported by the World Health Organization and other development partners—and measures to preserve macroeconomic stability while protecting the vulnerable.
Key elements of the response include:
- Increased health sector outlays.
- Supporting incomes and food security of the most vulnerable households with expanded social assistance and grain purchase programs.
- Easing liquidity constraints in the banking system.
- Supporting small and medium enterprises.
- Bolstering farmers’ incomes and ensuring food security through purchase and storage of agricultural harvests.

Immediate role of IMF support:
- The IMF’s emergency financing under the Rapid Credit Facility will help the authorities meet the large external financing gap and catalyze further assistance from the international community.
- Additional concessional donor support will be critical to close the remaining external financing gap and facilitate needed interventions to ease the economic and social impacts of the pandemic, while preserving Malawi’s hard-earned macroeconomic stability.
Fiscal stance:
- “A widening of the budget deficit is appropriate in the near-term, given the fiscal costs associated with the economic slowdown and critical additional health care and social spending needs, which should be executed transparently and targeted to the most affected parts of society.”
- The authorities’ commitment to the audit of COVID-19 related spending is welcome.
Medium-term priorities after the crisis:
- “Once the crisis abates, it will be important to safeguard medium-term debt sustainability by boosting domestic revenue mobilization and enhancing public financial management.”

Source: IMF Press Release No. 20/200 (May 1, 2020).