IMF Staff Completes Mission to the Republic of Malawi for Discussions on the Request for a Four-Year Extended Credit Facility Arrangement

IMF News, June 6, 2022

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IMF Staff Completes Mission to the Republic of Malawi for Discussions on the Request for a Four-Year Extended Credit Facility Arrangement

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Bibliographic details

• Published: June 6, 2022

Mission timing and participants

• Mission led by Mika Saito.
• Discussions held during May 25-June 3, 2022.
• Meetings conducted via hybrid and in-person meetings in Lilongwe.
• IMF staff held meetings with Minister of Finance and Economic Affairs Sosten Gwengwe, Reserve Bank of Malawi Governor Wilson Banda, senior government and Reserve Bank of Malawi officials, and the private sector.

Purpose and context

• Purpose: Discussions on the authorities’ Request for a Four-Year Extended Credit Facility (ECF) Arrangement.
• Context: Request comes "in the back of the protracted balance of payments problem."
• IMF support described as "critical at this juncture" for catalyzing donor support.
• Preconditions highlighted for IMF support: "being able to restore debt sustainability and resolving the misreporting case are pre-requisites for such support."

Macroeconomic policy discussions and objectives

• Focus on policies needed to:
  • "restore macroeconomic stability,"
  • "ensure public debt sustainability,"
  • "advance structural reforms to support sustainable and inclusive growth,"
  • "address the impact of the COVID pandemic, spillovers from war in Ukraine and climate-related shocks."

Foreign exchange market normalization and audit

• Authorities’ recent decision to normalize the foreign exchange market is described as "welcome" and intended "to help address foreign exchange availability."
• The special audit of Reserve Bank of Malawi (RBM) foreign exchange reserves is described as "now in the final stages."
• The audit report "should pave way for consideration by the IMF’s Executive Board of the misreporting of RBM Foreign Exchange Reserve case."
• The audit "will form the basis for consideration of the pending misreporting of RBM Foreign Exchange Reserves by the Executive Board of the IMF."

Debt sustainability and debt advisor engagement

• "The authorities have recently engaged a debt advisor to support their efforts to address the unsustainability of Malawi’s public debt."
• As work with the debt advisor "progresses," IMF staff will "reengag[e] the authorities towards a staff-level agreement."
• Mission statement reiterated that resolving debt unsustainability is a pre-requisite for IMF arrangement support.

IMF staff statement (selected quotes from Ms. Saito)

• "We had positive and productive discussions with the authorities on the current macroeconomic conditions and policies to steer the country towards macroeconomic stability and a sustainable debt path."
• "We welcome the authorities’ recent steps to normalize the forex market in line with the recommendations of Article IV Consultation concluded by the IMF Executive Board in December 2021 to help to improve foreign exchange availability."
• "The special audit of the official foreign exchange reserves of the Reserve Bank of Malawi (RBM) is now in the final stages."
• "The authorities have engaged a debt advisor to support their efforts in addressing Malawi’s unsustainable public debt. As this work progresses, the discussions with the authorities will resume towards a staff-level agreement."
• "The mission team thanks the Malawian authorities for their hospitality and productive discussions."

Source: IMF press release, June 6, 2022.

References

• Malawi and the IMF
• Press Releases
• PRESS CENTER
• [Article IV Consultation concluded by the IMF Executive Board in

December 2021](https://www.imf.org/en/News/Articles/2021/12/15/pr21377-imf-executive-board-concludes-2021-article-iv-consultation-with-the-republic-of-malawi)

• https://www.imf.org/en/home