{
  "title": "IMF Staff Completes 2025 Article IV Mission to Malawi",
  "publication": "IMF News, June 4, 2025",
  "sourceUrl": "https://www.imf.org/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission",
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  "summary": "An International Monetary Fund (IMF) team led by Justin Tyson visited Malawi from May 22 to June 3 to hold meetings with the Malawian authorities and other counterparts from the public and private sectors and civil society for the 2025 Article IV consultation",
  "publishDate": "2025-06-04",
  "sections": [
    {
      "heading": "Mission details and purpose",
      "content": "- IMF team led by Justin Tyson visited Malawi from May 22 to June 3 for the 2025 Article IV consultation.\n- Press Release No. 25/175.\n- Discussions focused on policies to restore macroeconomic stability, and the structural reforms needed to foster strong, inclusive, and durable growth.\n- End-of-Mission press releases convey preliminary findings; staff will prepare a report for the IMF's Executive Board, subject to management approval."
    },
    {
      "heading": "Context, macroeconomic outlook, and risks — key findings",
      "content": "- Real GDP growth declined slightly to 1.8 percent in 2024 due to drought affecting agricultural production, and foreign exchange and fuel shortages.\n- Over 20 percent of the population is facing high levels of food insecurity, up five percentage points over 2023.\n- Headline inflation began easing in late-2024 and reaccelerated in early-2025 in the context of maize prices rising to historical levels, elevated money growth and an increasing official-parallel exchange rate spread.\n- The FY2024/25 (April/March) fiscal balance fell short of budget targets and deteriorated relative to the previous year as revenue underperformed and expenditure ceilings were exceeded.\n- Current account deficit expanded further to about 22 percent of GDP and gross reserves are critically low, pointing to an overvalued exchange rate.\n- Malawi remains in external debt distress and domestic debt is growing.\n- Macroeconomic outlook under current policies:\n  - Real GDP growth: 2.4 percent in 2025, gradually increasing to 3.4 percent over the medium term.\n  - Inflation: projected to average 29 percent in 2025 and settle at around 14 percent over the medium term.\n  - Current account deficit: projected to improve to about 17 percent of GDP in 2025 based on lower fuel prices and a rebound in key exports.\n- General elections scheduled for September have reinforced political-economy constraints to macroeconomic adjustment.\n- After expiry of the ECF arrangement, the authorities are designing a homegrown reform program.\n- Risks are tilted to the downside:\n  - Downside risks: lower-than-anticipated grant inflows and food production, additional global trade tensions, and delayed reforms.\n  - Upside risk: greater-than-expected mining investment and production."
    },
    {
      "heading": "Fiscal policy — findings and recommendations",
      "content": "- Priority: return to a sustainable fiscal adjustment path to tackle the rising interest bill and create space for domestically-financed investment and pro-poor spending while ameliorating the sovereign-bank nexus.\n- Urgent domestic revenue mobilization needed to achieve fiscal sustainability in an equitable way.\n  - Options: broadening the tax base and tax policy instruments (e.g., reducing exemptions, and personal and corporate income tax reform).\n- Improve wage bill efficiency and rebalance expenditures towards human capital and social protection.\n- Public financial management improvements welcomed; reforms remain critical for strengthening fiscal governance and building public trust.\n  - Progress: expanding IFMIS coverage, bank reconciliations, and increasing public investment efficiency.\n  - Further actions: enhance budget development, execution, and reporting; improve procurement; strengthen SOE oversight.\n- Decisive steps needed to restore debt sustainability:\n  - Authorities have made some progress with bilateral creditors and continue engagement with external commercial creditors.\n  - Tangible progress on external debt restructuring could pave the way for new concessional inflows.\n  - Support needed to reduce the cost of domestic borrowing."
    },
    {
      "heading": "Price stability and exchange rate policy — findings and recommendations",
      "content": "- Tighter fiscal and monetary policies would support disinflationary efforts and ease pressure on the exchange rate.\n- A combination of more restrictive monetary policy and an urgent fiscal adjustment, including enhanced reporting on budget execution, could:\n  - Reduce broad money growth.\n  - Support policy credibility.\n  - Re-anchor inflation expectations.\n- Structural constraints may be contributing to entrenched inflation expectations.\n- Recommendation: unify the official and parallel exchange rates at a level reflecting fundamentals (discounting speculative factors) and stabilize the foreign exchange market.\n  - Rationale: the current regime with a large and volatile spread creates distortions, impedes exports, subsidizes some imports, encourages informality and tax avoidance, discourages FDI and official aid flows, and reduces domestic revenues.\n- Ensure consistency between the de facto exchange rate regime, the monetary policy framework and fiscal policy to support sustainable growth."
    },
    {
      "heading": "Financial sector policies — findings and recommendations",
      "content": "- Banking sector is well-capitalized, liquid, and profitable, but significant exposure to government borrowing and net foreign liabilities require continued careful monitoring.\n- Monitor banking sector’s credit and foreign exchange risks to preserve financial stability.\n- Increased banking sector credit to the private sector would support economic growth.\n  - Fiscal adjustment would reduce crowding out from public borrowing and support export-oriented investment.\n  - A lower inflation and interest rate environment would further support credit to businesses."
    },
    {
      "heading": "Structural reforms — findings and recommendations",
      "content": "- Improve the investment climate to attract investment, diversify the economy, and move up the value chain.\n  - Sustained multi-year prudent fiscal policies and removing price distortions (e.g., re-activating the automatic fuel price mechanism) would bolster policy credibility and strengthen external competitiveness.\n  - Address key structural impediments to raise productive capacity, reduce inflation and improve self-sustainability under the authorities’ Agriculture, Tourism, Mining and Manufacturing (ATMM) policy umbrella.\n- Further strengthen governance measures to support confidence in public service provision.\n  - Despite reforms including two National Anti-Corruption Strategies, gaps persist.\n  - Public procurement and SOE operations would benefit from greater transparency and less discretionary decision-making."
    },
    {
      "heading": "Closing",
      "content": "- The IMF mission team thanks the Malawian authorities and all other interlocutors for the candid discussions and their hospitality.\n\nIMF Communications Department, June 4, 2025.\n\n---\n\n\n References\n\n- Malawi and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission"
    }
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    "Published: June 4, 2025",
    "IMF team led by Justin Tyson visited Malawi from May 22 to June 3 for the 2025 Article IV consultation.",
    "Press Release No. 25/175.",
    "Discussions focused on policies to restore macroeconomic stability, and the structural reforms needed to foster strong, inclusive, and durable growth.",
    "End-of-Mission press releases convey preliminary findings; staff will prepare a report for the IMF's Executive Board, subject to management approval.",
    "Real GDP growth declined slightly to 1.8 percent in 2024 due to drought affecting agricultural production, and foreign exchange and fuel shortages.",
    "Over 20 percent of the population is facing high levels of food insecurity, up five percentage points over 2023.",
    "Headline inflation began easing in late-2024 and reaccelerated in early-2025 in the context of maize prices rising to historical levels, elevated money growth and an increasing official-parallel exchange rate spread.",
    "The FY2024/25 (April/March) fiscal balance fell short of budget targets and deteriorated relative to the previous year as revenue underperformed and expenditure ceilings were exceeded.",
    "Current account deficit expanded further to about 22 percent of GDP and gross reserves are critically low, pointing to an overvalued exchange rate.",
    "Malawi remains in external debt distress and domestic debt is growing.",
    "Macroeconomic outlook under current policies:",
    "General elections scheduled for September have reinforced political-economy constraints to macroeconomic adjustment.",
    "After expiry of the ECF arrangement, the authorities are designing a homegrown reform program.",
    "Risks are tilted to the downside:",
    "Priority: return to a sustainable fiscal adjustment path to tackle the rising interest bill and create space for domestically-financed investment and pro-poor spending while ameliorating the sovereign-bank nexus.",
    "Urgent domestic revenue mobilization needed to achieve fiscal sustainability in an equitable way.",
    "Improve wage bill efficiency and rebalance expenditures towards human capital and social protection.",
    "Public financial management improvements welcomed; reforms remain critical for strengthening fiscal governance and building public trust.",
    "Decisive steps needed to restore debt sustainability:",
    "Tighter fiscal and monetary policies would support disinflationary efforts and ease pressure on the exchange rate.",
    "A combination of more restrictive monetary policy and an urgent fiscal adjustment, including enhanced reporting on budget execution, could:",
    "Structural constraints may be contributing to entrenched inflation expectations.",
    "Recommendation: unify the official and parallel exchange rates at a level reflecting fundamentals (discounting speculative factors) and stabilize the foreign exchange market.",
    "Ensure consistency between the de facto exchange rate regime, the monetary policy framework and fiscal policy to support sustainable growth.",
    "Banking sector is well-capitalized, liquid, and profitable, but significant exposure to government borrowing and net foreign liabilities require continued careful monitoring.",
    "Monitor banking sector’s credit and foreign exchange risks to preserve financial stability.",
    "Increased banking sector credit to the private sector would support economic growth.",
    "Improve the investment climate to attract investment, diversify the economy, and move up the value chain.",
    "Further strengthen governance measures to support confidence in public service provision.",
    "The IMF mission team thanks the Malawian authorities and all other interlocutors for the candid discussions and their hospitality.",
    "[Malawi and the IMF](http://www.imf.org/external/country/MWI/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[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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