## Statement at the end of an IMF Staff Visit to Malawi

_IMF News, March 24, 2020_

## Source details

**Canonical URL:** [Statement at the end of an IMF Staff Visit to Malawi](https://www.imf.org/en/news/articles/2020/03/24/pr20101-malawi-statement-at-the-end-of-an-imf-staff-visit)

## Other formats

- [Markdown version](/en/news/articles/2020/03/24/pr20101-malawi-statement-at-the-end-of-an-imf-staff-visit/index.md)
- [Structured JSON version](/en/news/articles/2020/03/24/pr20101-malawi-statement-at-the-end-of-an-imf-staff-visit/index.json)
- [Bundle manifest](/en/news/articles/2020/03/24/pr20101-malawi-statement-at-the-end-of-an-imf-staff-visit/bundle-manifest.json)

## Bibliographic details
- Published: March 24, 2020

---

### Economic outlook and COVID-19
- With the evolution of the COVID-19 outbreak still largely unknown, the economic outlook is subject to substantial uncertainty.
- Prospects for the remainder of the year will depend on the extent of transmission to Malawi of COVID-19 and the magnitude of associated global and regional economic spillovers.
- Recent drivers of growth:
  - Strong agricultural harvests.
  - Reconstruction activity after Cyclone Idai.
- Medium-term growth projection:
  - Growth may rise further to 6-7 percent, backed by infrastructure that is more resilient to shocks from climate change, improved access to finance, crop diversification, and an improved business climate.
- Inflation outlook:
  - Anticipated to decline from 11.5 percent at end-2019 to 9.3 percent at end-2020, as elevated food inflation moderates, and gradually converge to 5 percent over the medium term.
- Key risk:
  - Potential for deeper disruption to economic activity in Malawi from the spread of COVID-19.

### Fiscal position, expenditures, and revenue
- Fiscal developments:
  - The authorities regained control over the budget in the first half of FY 2019/20, but maintaining this performance for the second half of the fiscal year will be challenging.
- Expenditure adjustments:
  - Expenditures have appropriately been increased to cover the cost of the upcoming election and to finance urgent health care preparations consistent with the government’s COVID-19 contingency plan developed with support from the WHO and other development partners.
- Revenue pressures:
  - Pressures from COVID-19 and political uncertainties ahead of the new Presidential elections are weighing on revenues.
- Policy actions and commitments:
  - Authorities are deploying measures to enhance spending efficiencies and address revenue shortfalls in the current fiscal year.
  - They expect to shift to a positive domestic primary balance in the coming years.
  - Committed to repaying arrears accumulated in recent years and addressing shortfalls in the system that led to them.
  - Will continue enhancing tax policy and revenue administration.
  - Critical reforms identified: strengthening transparency in the budget process, the medium-term budgetary framework, cash management, routinized bank reconciliation, and gradual upgrading of the existing public financial management system.

### Monetary policy and financial sector resilience
- Monetary policy focus:
  - Remains focused on preserving price stability over the medium-term.
- Banking sector improvements:
  - Banking system resilience continues to improve, with non-performing loans (NPLs) declining over the last three years and improved provisioning.
  - Credit to the private sector has picked up in recent months.
- Structural barriers to expanding access to finance:
  - Challenges with the collateral registry.
  - Mobile banking issues.
  - Property rights constraints.

### Medium-term strategy, public investment, and debt
- Malawi Growth and Development Strategy (MGDS) III aims:
  - Significant improvements in building resilience to climate change, productivity and competitiveness to unlock private sector potential.
- Infrastructure and debt considerations:
  - Authorities will continue to implement large-scale infrastructure projects, while preserving debt sustainability.
  - Malawi’s debt has risen but both its external and overall risk of debt distress remain “moderate.”
- Recommended public sector reforms:
  - Improve public investment management.
  - Enhance oversight and monitoring of state-owned enterprises and other parastatals.
  - Strengthen debt management.
  - Aim to reduce risks and benefit from more efficient and better quality spending.

### IMF mission, discussions, and next steps
- Mission details:
  - An IMF team led by Pritha Mitra, Mission Chief for Malawi, held a mission during March 10-23, 2020, to conduct the 2020 Article IV Consultation and hold discussions on the fourth review of the three-year arrangement for Malawi under the Extended Credit Facility (ECF) arrangement (Press Release No. 18/157).
  - Discussions were held in Lilongwe, Blantyre, and by video-conference from Washington D.C.
- Engagement and stakeholders:
  - The team held meetings with Minister of Finance Joseph Mwanamvekha, Governor of the Reserve Bank of Malawi (RBM) Dalitso Kabambe, other senior government and RBM officials, a broad range of national stakeholders outside government, as well as representatives of Malawi’s development partners.
- Process and follow-up:
  - The mission and the authorities had productive discussions on the 2020 Article IV Consultation and the fourth review under the ECF arrangement.
  - These discussions will continue in the weeks ahead as the impact of the COVID-19 outbreak on Malawi become clearer.
- Note on ECF:
  - 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.

*Statement at the end of an IMF Staff Visit to Malawi, March 24, 2020, IMF staff.*

---


## References

- [IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)
- [Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)
- [Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)
- [Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)
- [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/)
- [Press Release No. 18/157](https://www.imf.org/en/News/Articles/2018/04/30/pr18157-imf-executive-board-approves-under-the-ecf-arrangement-for-malawi)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/03/24/pr20101-malawi-statement-at-the-end-of-an-imf-staff-visit_