## IMF Staff Completes Review Mission to Malawi

_IMF News, March 22, 2017_

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**Canonical URL:** [IMF Staff Completes Review Mission to Malawi](https://www.imf.org/en/news/articles/2017/03/22/pr1792-imf-staff-completes-review-mission-to-malawi)

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## Bibliographic details
- Published: March 22, 2017

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### Mission findings and humanitarian response
- A second consecutive year of the El Niño-induced drought created an unprecedented humanitarian crisis that placed an estimated 6.7 million people—or 40 percent of the population—at risk of food insecurity.
- IMF and development partners' intervention helped stabilize maize prices and alleviated the adverse impact of the drought on the vulnerable population.
- The authorities expressed gratitude for the support of the IMF and development partners for their sizable contributions in addressing the humanitarian crisis.

### Macroeconomic outlook and recent performance
- Real GDP growth, after two consecutive years of drought, fell below 3 percent in 2016 but is expected to pick up in the range of 4 to 5 percent in 2017.
- The consumption-led recovery is expected to be driven mainly by a rebound in the agriculture, wholesale and retail, and telecommunications sectors.
- Annual inflation has now fallen to 16.1 percent (year-on-year) in February 2017—its lowest level in recent years. Both food and non-food inflation rates have contributed to the downward trend, reflecting prudent monetary and fiscal policies and the stabilization of food prices on account of humanitarian response.
- Foreign exchange reserve cover stabilized at about three months of imports.

### Monetary and fiscal policy assessment
- Tight monetary policy, which kept short-term money market rates positive in real terms, and stronger fiscal management were key to restoring confidence in the exchange rate that has remained stable.
- Commitment to the flexible exchange rate regime and the automatic fuel pricing mechanism continued to help Malawi respond to external shocks.
- Prudent fiscal policy, when combined with monetary policy geared toward maintaining positive real interest rates, should facilitate the achievement of the program’s objective of single digit inflation.

### Public financial management, debt, and budget priorities
- Discussions emphasized the need to consolidate recent improvements in revenue mobilization to contain current expenditures and reorient the budget toward development spending to improve resilience and address critical infrastructure gaps.
- The team underscored the need to clear past arrears, implement expenditure commitment controls to prevent their re-emergence, and to safeguard debt sustainability in light of the increase in the level of domestic debt.
- Completing bank reconciliations for FY15/16 is critical for presenting the review to the IMF Executive Board.

### Program status and next steps
- A team from the IMF, led by Oral Williams, visited Lilongwe from March 8–23, 2017, to conduct discussions on the ninth and final review under the Extended Credit Facility (ECF) arrangement.
- Based on progress to date, it is anticipated that a request to complete the ninth review under the ECF-supported program could be submitted for consideration by the IMF’s Executive Board in June 2017.
- Footnote on the ECF arrangement: The ECF is a lending arrangement that provides sustained program engagement over the medium to long-term in case of protracted balance of payments problems. The arrangement for Malawi in an amount equivalent to SDR 104.1 million (about US$ 144.4 million) was approved on July 23, 2012.

### Engagements and acknowledgments
- The team reached staff level understandings with the authorities to ensure that recent improvements in macroeconomic policy and outcomes are sustained.
- The team met with President Arthur Peter Mutharika, Minister of Finance Goodall Gondwe, Governor of the Reserve Bank of Malawi (RBM) Charles Chuka, other senior government and RBM officials, a broad range of national stakeholders outside government, as well as representatives of Malawi’s development partners.
- The team would like to thank the authorities for their hospitality and constructive cooperation.

*IMF Press Release — March 22, 2017*

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## References

- [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/)
- [ECF](http://www.imf.org/external/np/exr/facts/ecf.htm)
- [Press Release No. 12/273](https://www.imf.org/external/np/sec/pr/2012/pr12273.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/03/22/pr1792-imf-staff-completes-review-mission-to-malawi_