{
  "title": "Press Release: IMF Approves Second Annual ESAF Loan for Malawi",
  "publication": "IMF News, December 5, 1996",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9659",
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  "summary": "The IMF approved the second annual loan under the enhanced structural adjustment facility (ESAF) in an amount equivalent to SDR 15.3 million (about US$22 million) to support Malawi's economic program in 1996/97.",
  "publishDate": "1996-12-05",
  "sections": [
    {
      "heading": "Loan approval and financing terms",
      "content": "- The IMF approved the second annual loan under the enhanced structural adjustment facility (ESAF) in an amount equivalent to SDR 15.3 million (about US$22 million) to support Malawi's economic program in 1996/97.\n- The loan is available in two equal installments, the first of which is available on December 13, 1996.\n- ESAF loan terms: interest rate of 0.5 percent a year; repayable over 10 years, with a 5 1/2-year grace period."
    },
    {
      "heading": "Background and recent macroeconomic performance",
      "content": "- Malawi adopted comprehensive measures in 1995 to address large financial imbalances and received IMF support under a three-year ESAF in October 1995.\n- Performance under the first-year program described as satisfactory.\n- Key 1995–1996 outcomes:\n  - Real GDP growth in 1995 rebounded to 9 percent after a sharp drop in 1994.\n  - Inflation rose to 75 percent in 1995, reflecting large food price increases caused by a less than normal maize crop.\n  - Cumulative inflation during the first nine months of 1996 was a negative 0.6 percent, owing to a partial reversal of those increases.\n  - External position improved significantly, with a marked increase in gross international reserves despite a shortfall in external grants.\n  - The fiscal deficit was reduced sharply.\n  - Progress was made in structural reforms, notably in agriculture, the external sector, and the privatization of public enterprises.\n- Malawi accepted the obligations of Article VIII effective December 1995.\n- Malawi joined the IMF on July 19, 1965, and its quota is SDR 50.9 million (about US$73 million).\n- Malawi's outstanding use of IMF financing currently totals SDR 75.43 million (about US$108 million)."
    },
    {
      "heading": "Medium-term strategy (1996–98) and 1996-97 program objectives",
      "content": "- Medium-term objectives:\n  - Achieve an average annual GDP growth rate of 7 percent during 1996-98.\n  - Attain an annual inflation rate of 6 percent by end-1998.\n  - Reduce the external current account deficit (excluding grants) from 14.1 percent of GDP in 1995 to about 6.4 percent of GDP in 1998.\n  - Build up international reserves to the equivalent of 4.5 months of imports by end-1998.\n- Social objective: accommodate pressing social needs within the constraints of fiscal sustainability through continued shifts away from nonproductive and low-priority expenditure.\n- Program targets for 1996-97:\n  - Real GDP growth of 11 percent in 1996 and 5 percent in 1997.\n  - Annual inflation rate of 8 percent by end-1997.\n  - Increase in gross official international reserves to the equivalent of 4.5 months by end-1997.\n- Fiscal and monetary framework:\n  - Overall budget deficit (excluding grants) reduced from 13.6 percent of GDP in 1995 to 9.0 percent of GDP in 1996, and to 7.6 percent of GDP in 1997.\n  - Fiscal measures on the expenditure side: temporarily reinstating the cash budget; efficient expenditure allocation and control through improved budget procedures.\n  - Revenue-side reforms: broadening of the tax base; creation of an autonomous revenue authority; introduction of a value-added tax.\n  - Fiscal program designed to avoid any domestic financing to ensure inflation targets.\n  - Monetary policy will be consistent with growth, inflation, and balance of payments objectives and will allow for faster growth in credit to the private sector."
    },
    {
      "heading": "Structural reforms",
      "content": "- Agriculture:\n  - Continue measures to reestablish agriculture as an engine of growth, increase food security, and alleviate poverty.\n  - Liberalization of agricultural marketing and production arrangements has resulted in substantial improvements in the growth of smallholder production and diversification into nontraditional or drought-tolerant crops.\n- Privatization:\n  - Privatization program started in early 1996 aims at bringing to the point of sale 26 public enterprises in 1996/97, and 20 more in 1997/98.\n- Civil service reform:\n  - Government developing a comprehensive action plan to eliminate agencies, departments, and ministries with duplicating or overlapping functions.\n- External orientation:\n  - Improve Malawi's access to seaports.\n  - Restrict the number of import and export items requiring licenses to only those warranted by security, health, and environment considerations."
    },
    {
      "heading": "Addressing social issues and poverty alleviation",
      "content": "- Higher economic growth and inflation reduction are contributing significantly to poverty reduction.\n- Government poverty alleviation program priorities:\n  - Reform agriculture to benefit smallholders.\n  - Reallocate budgetary resources to the social sectors.\n  - Limit population growth.\n  - Improve the role of women in economic activities.\n- Two notable government projects:\n  - Free primary education program introduced in 1994.\n  - Malawi Social Action Fund to support community-based work programs."
    },
    {
      "heading": "The challenge ahead and donor support",
      "content": "- Continued efforts to reestablish financial stability are essential to achieve low inflation on a lasting basis.\n- Expeditious implementation of next stages of structural reform—particularly civil service reform and privatization—is crucial to attaining economic and social objectives under the program.\n- Malawi's efforts will require the continued assistance of the donor community."
    },
    {
      "heading": "Malawi: Selected Economic Indicators (as presented)",
      "content": "- Real GDP (percent change):\n  - 1994: -11.6\n  - 1995: 9.0\n  - 1996: 10.8\n  - 1997: 5.0\n  - 1998: (not listed)\n- Consumer prices (end of period) (percent change):\n  - 1994: 66.0\n  - 1995: 74.9\n  - 1996: 4.0\n  - 1997: 8.0\n  - 1998: 6.0\n- Overall fiscal balance, excluding grants (deficit-) (percent of GDP) 1/:\n  - 1994: -27.8\n  - 1995: -13.6\n  - 1996: -9.0\n  - 1997: -7.6\n  - 1998: -6.9\n- External current account balance, excluding official transfers (deficit-) (percent of GDP):\n  - 1994: -17.8\n  - 1995: -14.1\n  - 1996: -6.8\n  - 1997: -6.4\n  - 1998: (not listed)\n- Notes accompanying indicators:\n  - Sources: Malawian authorities; and IMF estimates and projections.\n  - Preliminary.\n  - Program.\n  - 1/ Fiscal year is April/March.\n\nPress Release No. 96/59, December 5, 1996.\n\n---\n\n\n References\n\n- Malawi and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9659"
    }
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    "Published: December 5, 1996",
    "The IMF approved the second annual loan under the enhanced structural adjustment facility (ESAF) in an amount equivalent to SDR 15.3 million (about US$22 million) to support Malawi's economic program in 1996/97.",
    "The loan is available in two equal installments, the first of which is available on December 13, 1996.",
    "ESAF loan terms: interest rate of 0.5 percent a year; repayable over 10 years, with a 5 1/2-year grace period.",
    "Malawi adopted comprehensive measures in 1995 to address large financial imbalances and received IMF support under a three-year ESAF in October 1995.",
    "Performance under the first-year program described as satisfactory.",
    "Key 1995–1996 outcomes:",
    "Malawi accepted the obligations of Article VIII effective December 1995.",
    "Malawi joined the IMF on July 19, 1965, and its quota is SDR 50.9 million (about US$73 million).",
    "Malawi's outstanding use of IMF financing currently totals SDR 75.43 million (about US$108 million).",
    "Medium-term objectives:",
    "Social objective: accommodate pressing social needs within the constraints of fiscal sustainability through continued shifts away from nonproductive and low-priority expenditure.",
    "Program targets for 1996-97:",
    "Fiscal and monetary framework:",
    "Agriculture:",
    "Privatization:",
    "Civil service reform:",
    "External orientation:",
    "Higher economic growth and inflation reduction are contributing significantly to poverty reduction.",
    "Government poverty alleviation program priorities:",
    "Two notable government projects:",
    "Continued efforts to reestablish financial stability are essential to achieve low inflation on a lasting basis.",
    "Expeditious implementation of next stages of structural reform—particularly civil service reform and privatization—is crucial to attaining economic and social objectives under the program.",
    "Malawi's efforts will require the continued assistance of the donor community.",
    "Real GDP (percent change):",
    "Consumer prices (end of period) (percent change):",
    "Overall fiscal balance, excluding grants (deficit-) (percent of GDP) 1/:",
    "External current account balance, excluding official transfers (deficit-) (percent of GDP):",
    "Notes accompanying indicators:",
    "[Malawi and the IMF](http://www.imf.org/external/country/MWI/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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