IMF Executive Board Discussed First Review under Malawi’s Staff-Monitored Program with Executive Board Involvement
July 28, 2023
- The Executive Board of the International Monetary Fund (IMF) discussed the first review of the 12-month Staff-Monitored Program with Executive Board involvement (PMB) for Malawi. The review was approved by the Management of the IMF on July 13, 2023.
- In light of a series of shocks, program performance was mixed. The authorities are taking corrective actions to establish a track record of policy implementation, possibly paving the way to an Extended Credit Facility (ECF) arrangement.
- The Executive Board agreed with staff that Malawi is on track to achieve the objectives of the PMB.
Washington, DC: The
Executive Board of the International Monetary Fund (IMF) discussed the
first review of the Staff-Monitored Program with Executive Board
Involvement (PMB) for Malawi.
Malawi has been affected by a series of shocks— including an outbreak of
cholera and Cyclone Freddy, which caused significant loss of life and
damage to infrastructure—since the approval of the
PMB on November 11, 2022
. In this context, growth has been weaker and inflation higher than
expected. The fiscal deficit in FY2022/23 (April/March) was larger than
expected at the time of the PMB. Meanwhile, external strains—including
shortage of foreign exchange, difficulties securing trade credit, and a
widening spread between official and bureau exchange rates—have heightened.
Despite a sharp reduction in the current account deficit, accumulation of
foreign exchange reserves has been slower than expected, implying an
increase in informal trade.
Cyclone Freddy has weighed on the outlook for 2023 and led to a lower
growth forecast and a higher inflation forecast. Key downside risks include
slippages in program implementation, delays in the ongoing external debt
restructuring process, and further external shocks.
Performance under the PMB has been mixed, but the authorities are
addressing challenges and continue to commit to the PMB’s agreed
macroeconomic adjustment path and policy reforms. The authorities are
taking corrective actions necessary to demonstrate their capacity to
implement the agreed macroeconomic adjustment and reforms, as well as to
build the policy track record needed to support their prospective request
for an Extended Credit Facility (ECF) arrangement.
At the conclusion of the Executive Board’s discussion, Mr. Bo Li,
Deputy Managing Director, and Acting Chair made the following
statement:
“Steadfast implementation of and unwavering commitment to this
Staff-Monitored Program with Executive Board Involvement (PMB) will be
critical to restore macroeconomic stability and establish a track record to
support a prospective request for an Extended Credit Facility (ECF)
arrangement.”
“Successful debt restructuring is vital to deliver macroeconomic stability.
The authorities’ external debt restructuring strategy aims to bring
external debt service down substantially through a significant treatment of
commercial debt and official bilateral debt. A concerted effort among the
authorities, their creditors, and their international development partners
will be crucial to ensure successful implementation of the external debt
restructuring strategy.”
“Fiscal discipline, supported by a robust Public Financial Management (PFM)
system and timely production of comprehensive fiscal reports, remains
critical. Concerted effort by the authorities and other domestic
stakeholders to prepare for fiscal financing challenges is important. Price
stability supported by fiscal consolidation is critical to prevent a
further erosion of purchasing power for those living in poverty and food
insecurity. Rebuilding buffers is critically important to reduce Malawi’s
vulnerability to external shocks.”
“Addressing weakness in governance and institutions remain important
priorities, as demonstrated by the recent fertilizer deal, which is
concerning from a governance perspective. The authorities’ governance and
procurement practices should be strengthened to avoid such incidents in the
future.”
“The Management-approved Staff Monitored Program (SMP) is sufficiently
robust and remains on track to meet its objectives.”
Table 1. Malawi: Selected Economic Indicators,
2021–28
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
2025
|
2026
|
2027
|
2028
|
|
Actual
|
|
PMB Approval
|
Est.
|
|
PMB Approval
|
Proj.
|
|
Proj.
|
National accounts and prices
(percent change, unless otherwise
indicated)
|
GDP at constant market prices
|
4.6
|
|
0.8
|
0.8
|
|
2.4
|
1.7
|
|
3.3
|
3.8
|
4.3
|
4.5
|
4.6
|
Nominal GDP (billions of Kwacha)
|
9,976
|
|
11,354
|
11,799
|
|
14,018
|
14,768
|
|
17,728
|
20,462
|
22,948
|
25,503
|
28,211
|
GDP deflator
|
8.2
|
|
17.3
|
17.3
|
|
20.6
|
23.1
|
|
16.3
|
11.2
|
7.5
|
6.3
|
5.8
|
Consumer prices (end of period)
|
11.5
|
|
26.0
|
25.4
|
|
20.4
|
24.4
|
|
15.2
|
9.9
|
7.6
|
6.5
|
6.5
|
Consumer prices (annual average)
|
9.3
|
|
20.8
|
20.8
|
|
22.7
|
24.8
|
|
18.3
|
12.2
|
8.1
|
6.8
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and savings
(percent of GDP)
|
National savings
|
-5.2
|
|
-4.8
|
9.9
|
|
-3.6
|
4.7
|
|
2.5
|
0.7
|
1.7
|
3.4
|
3.6
|
Government
|
-5.9
|
|
-5.1
|
-5.6
|
|
-7.8
|
-6.2
|
|
-6.4
|
-5.8
|
-4.6
|
-2.3
|
-1.3
|
Private
|
0.7
|
|
0.3
|
15.5
|
|
4.2
|
11.0
|
|
9.0
|
6.5
|
6.3
|
5.7
|
4.9
|
Gross investment
|
8.9
|
|
9.9
|
13.1
|
|
10.1
|
12.7
|
|
11.5
|
9.3
|
9.3
|
9.8
|
9.5
|
Government
|
6.4
|
|
6.9
|
10.2
|
|
7.3
|
9.9
|
|
8.7
|
6.2
|
5.8
|
5.5
|
5.4
|
Private
|
2.6
|
|
3.0
|
3.0
|
|
2.8
|
2.8
|
|
2.8
|
3.1
|
3.4
|
4.2
|
4.2
|
Saving-investment balance
|
-14.1
|
|
-14.8
|
-3.2
|
|
-13.6
|
-7.9
|
|
-9.0
|
-8.6
|
-7.6
|
-6.3
|
-5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central government
(percent of GDP on a fiscal year
basis) 1, 2
|
Revenue
|
14.6
|
|
15.4
|
14.3
|
|
15.5
|
17.4
|
|
17.7
|
19.8
|
18.9
|
17.3
|
18.1
|
Tax and nontax revenue
|
12.9
|
|
13.4
|
12.5
|
|
13.9
|
13.5
|
|
14.9
|
17.5
|
17.2
|
15.9
|
17.0
|
Grants
|
1.7
|
|
1.9
|
1.8
|
|
1.6
|
3.9
|
|
2.7
|
2.3
|
1.6
|
1.4
|
1.1
|
Expenditure and net lending
|
21.9
|
|
24.3
|
22.6
|
|
24.6
|
29.3
|
|
27.5
|
27.8
|
25.4
|
23.6
|
23.1
|
Overall balance (excluding grants)
|
-9.1
|
|
-11.6
|
-10.8
|
|
-10.6
|
-15.8
|
|
-13.2
|
-11.7
|
-9.0
|
-7.8
|
-6.2
|
Overall balance (including grants)
|
-7.4
|
|
-9.7
|
-9.0
|
|
-9.0
|
-11.8
|
|
-10.5
|
-9.4
|
-7.3
|
-6.4
|
-5.0
|
Foreign financing
|
1.3
|
|
2.8
|
2.6
|
|
-0.6
|
3.3
|
|
0.6
|
0.0
|
-0.1
|
-0.4
|
-0.2
|
Total domestic financing
|
8.0
|
|
7.4
|
6.9
|
|
5.6
|
8.5
|
|
8.4
|
8.6
|
6.4
|
6.6
|
5.3
|
Financing gap/residual gap
|
0.0
|
|
0.0
|
0.0
|
|
4.1
|
0.0
|
|
1.5
|
0.8
|
1.0
|
0.2
|
0.0
|
Discrepancy
|
-0.1
|
|
-0.8
|
-0.7
|
|
0.0
|
0.0
|
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
Primary balance
|
-3.6
|
|
-5.4
|
-5.0
|
|
-3.3
|
-6.8
|
|
-4.9
|
-1.6
|
1.2
|
1.5
|
2.1
|
Domestic primary balance
3
|
-2.5
|
|
-4.1
|
-3.8
|
|
-0.6
|
-3.8
|
|
-2.8
|
0.5
|
2.9
|
2.8
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money and credit
(change in percent of broad money at
the end of the period, unless
otherwise indicated)
|
Broad money
|
30.0
|
|
27.5
|
38.8
|
|
23.5
|
25.2
|
|
20.0
|
15.4
|
12.2
|
11.1
|
10.6
|
Net foreign assets
|
-3.9
|
|
42.1
|
-13.8
|
|
19.1
|
-5.3
|
|
8.4
|
2.8
|
7.2
|
4.4
|
6.3
|
Net domestic assets
|
33.9
|
|
-14.6
|
52.6
|
|
4.3
|
30.5
|
|
11.7
|
12.6
|
5.0
|
6.7
|
4.3
|
o/w Net claims on the
government
|
41.0
|
|
28.0
|
39.0
|
|
26.0
|
26.1
|
|
18.8
|
10.6
|
14.3
|
10.5
|
15.3
|
Credit to the private sector
(percent change)
|
22.2
|
|
27.9
|
24.1
|
|
14.7
|
16.0
|
|
8.2
|
5.1
|
8.6
|
8.8
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sector
(US$ millions, unless otherwise
indicated)
|
Exports (goods and services)
|
1,191
|
|
1,294
|
1,125
|
|
1,421
|
1,322
|
|
1,454
|
1,568
|
1,662
|
1,814
|
1,940
|
Imports (goods and services)
|
3,332
|
|
3,406
|
1,835
|
|
3,173
|
2,487
|
|
2,608
|
2,700
|
2,744
|
2,818
|
2,936
|
Gross official reserves
4
|
429
|
|
172
|
120
|
|
409
|
499
|
|
747
|
846
|
996
|
1,106
|
1,202
|
(months of imports)
|
1.6
|
|
0.6
|
0.6
|
|
1.5
|
2.3
|
|
3.3
|
3.7
|
4.2
|
4.5
|
4.7
|
Net international reserves
5
|
-834.8
|
|
-584.1
|
-1,237.9
|
|
-312.2
|
-673.1
|
|
-594.4
|
-575.9
|
-438.7
|
-321.4
|
-156.3
|
Current account (percent of
GDP)
|
-14.1
|
|
-14.8
|
-3.2
|
|
-13.6
|
-7.9
|
|
-9.0
|
-8.6
|
-7.6
|
-6.3
|
-5.9
|
Current account, excl. official
transfers (percent of GDP)
|
-14.1
|
|
-14.8
|
-3.8
|
|
-13.6
|
-7.9
|
|
-8.9
|
-8.6
|
-7.5
|
-6.3
|
-5.9
|
Current account, excl. project
related imports (percent of GDP)
|
-12.0
|
|
-12.3
|
0.2
|
|
-10.8
|
-4.3
|
|
-5.8
|
-6.3
|
-5.7
|
-4.9
|
-4.3
|
Real effective exchange rate
(percent change)
|
-5.7
|
|
...
|
2.9
|
|
...
|
...
|
|
...
|
...
|
...
|
...
|
...
|
Overall balance (percent of
GDP)
|
0.0
|
|
-1.7
|
-0.1
|
|
-2.4
|
-2.6
|
|
0.1
|
-0.2
|
0.0
|
0.6
|
1.2
|
Financing gap (percent of GDP)
|
0.0
|
|
2.8
|
0.0
|
|
4.9
|
5.8
|
|
2.6
|
1.6
|
1.9
|
0.8
|
0.1
|
Terms of trade (percent change)
|
-19.0
|
|
-14.9
|
-14.3
|
|
-0.5
|
11.4
|
|
-1.8
|
1.8
|
2.2
|
2.1
|
-0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt stock and service
(percent of GDP, unless otherwise
indicated)
|
External debt (public sector)
|
31.5
|
|
38.9
|
34.4
|
|
37.1
|
37.1
|
|
35.3
|
33.5
|
30.9
|
28.8
|
27.0
|
NPV of public external debt (percent
of exports)
|
218.6
|
|
202.3
|
264.7
|
|
176.6
|
187.1
|
|
162.3
|
145.9
|
132.3
|
119.3
|
110.1
|
Domestic public debt 6
|
30.0
|
|
37.7
|
40.8
|
|
37.5
|
43.2
|
|
44.9
|
47.4
|
48.6
|
49.3
|
48.1
|
Total public debt 6
|
61.5
|
|
76.6
|
75.2
|
|
74.6
|
80.2
|
|
80.2
|
80.9
|
79.6
|
78.1
|
75.1
|
External debt service (percent of
exports)
|
15.2
|
|
55.6
|
12.0
|
|
26.7
|
59.8
|
|
25.2
|
20.1
|
18.3
|
12.9
|
10.6
|
External debt service (percent of
revenue excl. grants)
|
4.9
|
|
43.2
|
7.8
|
|
24.6
|
44.7
|
|
23.6
|
18.7
|
17.0
|
11.6
|
9.4
|
Sources: Malawian authorities; and
IMF staff estimates and
projections.
|
1The financial year,
2021, runs from July 1, 2020 to
June 30, 2021. FY2021/22 covers 1
July 2021 to 31 March 2022, to
accommodate the transition to an
April - March fiscal year.
starting from FY2022/23.
|
2Please note that
government fiscal statistics are
reported following the Government
Finance Statistics Manual (2014)
starting 2020 projections and going
forward.
|
3Domestic primary
balance is calculated by subtracting
current expenditures (except
interest payment) and
domestically-financed development
expenditures from tax and
nontax revenues.
|
4Gross official
reserves figures include encumbered
deposits in 2021; all figures
from 2022 onwards do not include
encumbered deposits. Readily
available gross official
reserves were US$71.7 million in
2021.
|
52021 NIR is
calculated as gross official
reserves minus a sum of Use of Fund
Credit, repayments projection
of medium-term debt by remaining
maturity, and short-term swap
outstanding. 2022 NIR is calculated
as define in the TMU at the
time of the PMB application.
Thereafter, the net international
reserves reported not only
subtract foreign currency drains
(FCD) as defined in the TMU of
the First Review of the PMB, but
also all outstanding foreign
currency debt service to external
creditors to which the RBM
(including as an agent of the
government) is in arrears and or
servicing via other means, in
line with debt restructuring
strategy.
|
6Domestic debt is at
face value and future borrowings is
at cost value.
|
|
IMF Communications Department
MEDIA RELATIONS
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Phone: +1 202 623-7100Email: MEDIA@IMF.org