Press Release No. 05/255

The following statement was issued on November 21 in Lilongwe by Mr. Thomas Baunsgaard, Resident Representative of the International Monetary Fund (IMF) in Malawi:

"An IMF mission, headed by Mr. Calvin McDonald, visited Malawi during November 7-21, 2005, to conduct the first review under Malawi's Poverty Reduction and Growth Facility (PRGF). The three-year PRGF arrangement, approved by the Executive Board of the IMF on August 5, 2005, provides SDR38.17 million (about US$55 million) to support the implementation of Malawi's economic reform program. The mission held discussions with the Minister of Finance, the Governor of the Reserve Bank, other senior government officials, and met with representatives from the private sector, NGOs, and the donor community.

"The implementation of the PRGF arrangement has been satisfactory; all quantitative targets have been met through end-September (the first test date under the PRGF) despite short-term delays in the disbursement of some budget support. There has also been progress in implementing structural reforms under the program.

"Economic growth for 2005, however, has been affected by the agricultural slump and high international oil prices, although a rebound is possible in 2006 depending on next year's harvest. The paramount challenge in the coming months will be to address the food security emergency, and the PRGF-supported program will continue to accommodate the scaled-up food operations. The government has already taken substantial actions, with the support of donors. However, given the constraining level of foreign reserves, donor support will remain critical to finance any additional food imports.

"The mission also reviewed the outlook for fiscal and monetary policies for the remainder of 2005/06. Close adherence to the budget approved by parliament is essential to sustain the recent improvement in fiscal policies and prudent monetary policies are required to respond to external shocks.

"Consideration by the IMF Executive Board of the first review under the PRGF arrangement is tentatively scheduled for early next year. Approval of the first review under the PRGF by the Executive Board would allow a disbursement of SDR4.9 million (about US$7 million)."