Statement at the End of an International Monetary Fund (IMF) Staff Visit to Malawi
Malawi’s recent economic performance has been favorable despite the impact of Cyclone Idai; Economic growth is expected to strengthen to about 4.5 percent in 2019 supported by a rebound in agriculture in most of the country and reconstruction of infrastructure damaged by the cyclone; Inflation is expected to remain in single digits and gradually converge to 5 percent over the medium term.
An International Monetary Fund (IMF) team led by Pritha Mitra, Mission Chief for Malawi, visited Lilongwe from September 10-17, 2019 to conduct discussions on the combined second and third reviews of the three-year arrangement for Malawi under the Extended Credit Facility (ECF) (see Press Release No. 18/157 ).
At the end of the mission, Ms. Mitra issued the following statement:
Malawi’s recent economic performance has been favorable despite the impact of Cyclone Idai. Economic growth is expected to strengthen to about 4.5 percent in 2019 supported by a rebound in agriculture in most of the country and reconstruction of infrastructure that was damaged by the cyclone in the southern region. Over the medium-term, growth could rise further to 6-7 percent, backed by greater access to finance, crop diversification, an improved business climate, and more resilient infrastructure, including improved electricity generation. Inflation is expected to remain in single digits and gradually converge to 5 percent over the medium term.
Performance under the program has been good. All but one of the quantitative performance criteria (QPC) for end-June were met. The target on the primary balance (i.e., fiscal balance that excludes interest payments) was missed largely due to shortfalls in tax revenues, unexpected goods and services spending to hold elections and to support post-cyclone disaster relief, and increased domestic development spending. Structural reforms are advancing.
Looking ahead, it will be important to preserve macroeconomic stability while enhancing poverty-reducing and resilient growth. To this end, fiscal policy should focus on preserving debt sustainability while creating space for critical growth-enhancing spending�including rehabilitation and reconstruction after the cyclone.
Key structural reform areas are to further strengthen public financial management, including, bank reconciliation, commitment control and cash management, transparency of the budget process, and revenue administration as well as to improve debt management, public investment management, and oversight and monitoring of state-owned enterprises and other parastatals.
Monetary policy should remain focused on maintaining single-digit inflation and preserving price stability over the medium term. The banking system remains stable and its resilience is improving with reduced non-performing loans and increased provisioning. Credit to the private sector has picked up in recent months but sustainably increasing access to finance will require addressing structural barriers, such as challenges with the collateral registry, mobile banking, and property rights.
The mission and the authorities will continue their discussions in the weeks ahead, including in the context of the IMF’s Annual Meetings during October 14-20 in Washington, D.C.
The team met 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 non-governmental stakeholders, as well as representatives from Malawi’s development partners. The IMF team thanks the authorities for their warm hospitality, strong cooperation, and constructive discussions.rdquo;
Source: International Monetary Fund (IMF).