IMF Executive Board Completes Ninth Review under Malawi’s ECF Arrangement and Approves US$ 26.9 Million Disbursement

IMF News, June 21, 2017

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Canonical URL: IMF Executive Board Completes Ninth Review under Malawi’s ECF Arrangement and Approves US$ 26.9 Million Disbursement

The Executive Board completed the ninth and final review of Malawi’s program under the Extended Credit Facility (ECF) arrangement.
Immediate disbursement: the equivalent of SDR 19.5 million (about US$ 26.9 million).
Total disbursements under the arrangement to date: the equivalent of SDR 138.8 million (about US$ 191.4 million).
The Board approved waivers of non-observance of performance criteria related to:
- net domestic assets of the Reserve Bank of Malawi,
- net international reserves of the Reserve Bank of Malawi,
- net domestic borrowing by the central government.

Original ECF arrangement amount: SDR 104.1 million (about US$ 143.5 million), approved on July 23, 2012.
Augmentation of access: equivalent of SDR 34.7 million (about US$ 47.8 million or 25 percent of quota), approved on June 20, 2016, to respond to the El Niño-induced drought.
Program objectives: achievement and maintenance of macroeconomic stability; implementation of policies and structural reforms to spur growth, diversify the economy and reduce poverty.

Real GDP Growth is expected to pick up in 2017 due to better prospects for agricultural output, including the maize harvest.
Annual inflation is expected to remain on a downward trend.
The macroeconomic outlook remains challenging, reflecting uncertainties related to adverse weather conditions and policy slippages.
Weather-related shocks context:
- Two consecutive years of weather-related shocks placed an estimated 40 percent of the population at risk of food insecurity.
- Relief efforts helped stabilize maize prices and alleviate the adverse impact of the drought on the vulnerable population.

Near-term policy mix:
- Center on reducing inflation by combining tight monetary and fiscal policies.
- Limit expenditures to available resources.
- Monetary policy should aim at maintaining positive short-term real money market interest rates.
Public financial management:
- Strengthen commitment controls.
- Conduct routine bank reconciliations.
- Produce regular fiscal reporting to prevent misappropriation of public funds and rebuild trust and confidence in the budget process.
Fiscal strategy:
- Implement prudent fiscal policy to safeguard medium-term fiscal and debt sustainability.
- Improve revenue mobilization and expenditure efficiency to reduce aid dependency and create fiscal space for social spending.
Financial sector stability:
- Closely monitor banks’ compliance with prudential norms, including AML/CFT.
- Increase provisioning.
- Facilitate rationalization of the banking sector.
- Strengthen creditor rights and reduce lengthy judicial processes in recovering collateral to help reduce non-performing loans.

Press Release No. 17/236, June 21, 2017.