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International Monetary Fund. African Dept.
Presidential elections in June 2020, a re-run of the canceled 2019 elections, resulted in a change of government, with President Chakwera securing 59 percent of the vote. The new administration is facing a rapid acceleration of COVID-19 cases in Malawi and adverse spillovers from continued deterioration of the global and regional economic situation, significantly worsening the macroeconomic outlook. Consequently, an additional urgent balance of payments need of 2.9 percent of GDP has arisen—bringing the total external financing gap in 2020 to 5.0 percent of GDP. The authorities have requested an additional disbursement of 52.1 percent of quota (SDR 72.31 million) under the “exogenous shock” window of the Rapid Credit Facility (RCF), where 30 percent of the disbursement would finance the government budget. This follows the May 1, 2020 Board approval of a 47.9 percent of quota RCF disbursement (without budget support). The authorities have cancelled the Extended Credit Facility (ECF) and expressed a strong interest in discussing a new ECF—better aligned with their new long-term growth and reform strategy—once conditions permit.
International Monetary Fund. African Dept.
This paper discusses Malawi’s Second and Third Reviews Under the Three-Year Extended Credit Facility Arrangement and Requests for Waivers of NonObservance of Performance Criteria and Augmentation of Access. Program-supported structural reforms advanced, addressing several important gaps that had previously been identified in public financial management. All quantitative performance criteria were met except those on the primary balance, which were missed largely due to faster than envisaged implementation of rural electrification and development projects, unexpected spending for disaster relief and to ensure safety during elections and post-election protests. The authorities aim to entrench macroeconomic stability, preserve debt sustainability, and advance governance reforms while attaining higher, more inclusive, and resilient growth. Essential reconstruction and security spending will be accommodated by reprioritizing spending and a modest relaxation in the FY 2019/20 domestic primary balance target. Monetary policy remains targeted on containing inflation and exchange rate flexibility will buffer shocks and preserve competitiveness. Financial sector resilience continues to be strengthened.
International Monetary Fund. African Dept.
Malawi’s economic growth remains moderate, reflecting a weak agricultural harvest and continued electricity shortages. Fiscal deficits continue to be financed domestically, as donor funding remains constrained by governance concerns since the 2013 cashgate scandal, resulting in an increasing public debt burden. Presidential elections are scheduled for mid-2019. Program performance. Most quantitative performance criteria (QPC) were met at end-June 2018, with significant overperformance on international reserves and the reduction in Reserve Bank of Malawi (RBM) holdings of government securities. The QPC on the primary fiscal balance was missed by 0.9 percent of GDP due to expenditure overruns. The continuous QPC on new non-concessional external debt was missed due to a technical oversight in the Technical Memorandum of Understanding. Based on corrective measures, the authorities request waivers of non-observance. Two structural benchmarks were observed and most of the rest have been completed with delay.
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance report assesses the state of public investment management (PIM) in Malawi. Measured against the overall strength of its PIM institutions, Malawi performs broadly in line with other low-income developing countries and sub-Saharan African countries, but less well than better-performing emerging markets. Measures of institutional strength show how well Malawi rates in terms of its existing laws and regulations, as well as the formal guidelines and instructions issued by the government to implement these laws. The public investment management assessment diagnostic tool also measures how effectively, in practice, the government implements and enforces these laws and regulations. On this measure of effectiveness, Malawi performs relatively poorly. Looking at individual indicators of PIM, Malawi’s performance is mixed.
International Monetary Fund. African Dept.
This paper discusses Malawi’s Ninth Review Under the Extended Credit Facility Arrangement and Request for Waivers for Nonobservance of performance criteria. Real GDP growth is expected to range between 4–5 percent in 2017 owing to a good agricultural harvest and its expected spillovers to other sectors of the economy. Growth prospects, however, will be constrained by persistent power blackouts, water shortages, and access to credit. Real growth is expected to gradually increase over the medium term as macroeconomic conditions stabilize and investment and consumption levels rise. The outlook remains challenging, reflecting uncertainties related to weather conditions, the impact of the fall armyworm infestation on food crops and risks of policy slippages.
Mr. Pokar D Khemani and Mr. Benoit Wiest
The accuracy and reliability of government accounts and fiscal data is an issue in a number of countries, with significant and persistent discrepancies that can indicate underlying weaknesses in the country’s public financial management system. This note provides guidance on how to detect issues with data quality, perform integrity checks, and reconcile fiscal data from various sources. It discusses the importance of reconciliation to provide reasonable assurance on the quality and reliability of government fiscal data, explores the main reasons for which discrepancies may arise, and explains how to conduct quality checks. The note concludes with recommendations for country teams of concrete steps to ensure data quality.
International Monetary Fund. African Dept.
This paper provides a review of the economic performance of Malawi under the program supported by an Extended Credit Facility (ECF) arrangement. Malawi’s economy has been hit hard by weather-related shocks for a second consecutive year, further weakening growth and worsening food insecurity. Growth is estimated to have declined from 5.7 percent in 2014 to 3 percent in 2015 and is projected to drop further to 2.7 percent this year. Under the ECF program, the macroeconomic framework in the near term will be anchored on a policy mix incorporating a tight monetary stance and a level of domestic fiscal financing consistent with disinflation.
International Monetary Fund. African Dept.
This paper discusses Malawi’s Fifth and Sixth Reviews Under the Extended Credit Facility (ECF) Arrangement, Request for Waivers for Non-observance of Performance Criteria (PCs), Extension of the Arrangement, Modification of PCs, and Rephasing of Disbursements. Program implementation was uneven given external financing shortfalls with several PCs not being observed. Three out of seven PCs for the fifth review were not met, including the continuous PC on the contracting of nonconcessional external loans. The new authorities are firmly committed to the core policies and objectives of the original ECF-supported program. Program discussions focused on key policy actions to address these challenges and bring the program back on track.
International Monetary Fund. African Dept.
This Supplement Information focuses on recent developments regarding the Malawi government’s response to the recent fiscal scandal and on the implementation of two remaining prior actions. The IMF staff welcomes the continued progress in implementing remedial actions to address the recent fraud and actions by the authorities toward meeting the end-December 2013 quantitative targets. The IMF staff also welcomes the interim forensic audit report. Although it did not contain all the information sought by the IMF staff, it had enough to assure the IMF staff that the remedial measures being implemented by the authorities to strengthen system controls and financial management are in the right areas. Some risks remain. It will be important to cautiously implement the fiscal spending program to preserve buffers, lest the final audit reveal slightly larger fund misappropriation.