## IMF Staff Completes 2025 Article IV Mission to Malawi _IMF News, June 4, 2025_ ## Source details **Canonical URL:** [IMF Staff Completes 2025 Article IV Mission to Malawi](https://www.imf.org/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission) ## Other formats - [Markdown version](/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission/index.md) - [Structured JSON version](/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission/index.json) - [Bundle manifest](/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission/bundle-manifest.json) ## Bibliographic details - Published: June 4, 2025 --- ### Mission details and purpose - 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. ### Context, macroeconomic outlook, and risks — key findings - 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: - Real GDP growth: 2.4 percent in 2025, gradually increasing to 3.4 percent over the medium term. - Inflation: projected to average 29 percent in 2025 and settle at around 14 percent over the medium term. - 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. - 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: - Downside risks: lower-than-anticipated grant inflows and food production, additional global trade tensions, and delayed reforms. - Upside risk: greater-than-expected mining investment and production. ### Fiscal policy — findings and recommendations - 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. - Options: broadening the tax base and tax policy instruments (e.g., reducing exemptions, and personal and corporate income tax reform). - 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. - Progress: expanding IFMIS coverage, bank reconciliations, and increasing public investment efficiency. - Further actions: enhance budget development, execution, and reporting; improve procurement; strengthen SOE oversight. - Decisive steps needed to restore debt sustainability: - Authorities have made some progress with bilateral creditors and continue engagement with external commercial creditors. - Tangible progress on external debt restructuring could pave the way for new concessional inflows. - Support needed to reduce the cost of domestic borrowing. ### Price stability and exchange rate policy — findings and recommendations - 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: - Reduce broad money growth. - Support policy credibility. - Re-anchor inflation expectations. - 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. - 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. - Ensure consistency between the de facto exchange rate regime, the monetary policy framework and fiscal policy to support sustainable growth. ### Financial sector policies — findings and recommendations - 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. - Fiscal adjustment would reduce crowding out from public borrowing and support export-oriented investment. - A lower inflation and interest rate environment would further support credit to businesses. ### Structural reforms — findings and recommendations - Improve the investment climate to attract investment, diversify the economy, and move up the value chain. - 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. - 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. - Further strengthen governance measures to support confidence in public service provision. - Despite reforms including two National Anti-Corruption Strategies, gaps persist. - Public procurement and SOE operations would benefit from greater transparency and less discretionary decision-making. ### Closing - The IMF mission team thanks the Malawian authorities and all other interlocutors for the candid discussions and their hospitality. *IMF Communications Department, June 4, 2025.* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission_