Malawi, a fragile state with one of the highest incidences of poverty, food insecurity and frequent weather-related shocks, has been severely affected by the pandemic. There are signs of gradual recovery and daily COVID-19 positive cases remain relatively low: real GDP growth in 2021 is projected to pick up to 2.2 percent from 0.9 percent in 2020 helped by a good harvest. However, inflation is expected to increase to 9 percent in 2021 from 8.6 percent in 2020, driven by increases in prices of fuel, fertilizer and food, leaving real per capita growth in the negative region.
International Monetary Fund. Independent Evaluation Office
This evaluation assesses how well IMF-supported programs helped to sustain economic growth while delivering adjustment needed for external viability over the period 2008–19. The evaluation finds that the Fund’s increasing attention to growth in the programs has delivered some positive results. Specifically, it does not find evidence of a consistent bias towards excessive austerity in IMF-supported programs. Indeed, programs have yielded growth benefits relative to a counterfactual of no Fund engagement and boosted post-program growth performance. Notwithstanding these positive findings, program growth outcomes consistently fell short of program projections. Such shortfalls imply less protection of incomes than intended, fuel adjustment fatigue and public opposition to reforms, and jeopardize progress towards external viability. The evaluation examines how different policy instruments were applied to support better growth outcomes while achieving needed adjustment. Fiscal policies typically incorporated growth-friendly measures but with mixed success. Despite some success in promoting reforms and growth, structural conditionalities were of relatively low depth and their potential growth benefits were not fully realized. Use of the exchange rate as a policy tool to support growth and external adjustment during programs was quite limited. Lastly, market debt operations were useful in some cases to restore debt sustainability and renew market access, yet sometimes were too little and too late to deliver the intended benefits. The evaluation concludes that the IMF should seek to further enhance program countries’ capacity to sustain activity while undertaking needed adjustment during the program and to enhance growth prospects beyond the program. Following this conclusion, the report sets out three recommendations aimed at strengthening attention to growth implications of IMF-supported programs, including the social and distributional consequences.
This paper discusses Malawi’s Request for Disbursement Under the Rapid Credit Facility (RCF). The coronavirus disease 2019 pandemic is having a severe impact on Malawi, creating an urgent balance of payments need. The authorities have been proactive in mitigating the impact of the pandemic, including through increased spending on health care and social assistance, supporting small and medium enterprises, bolstering farmers’ incomes and ensuring food security through purchase and storage of agricultural harvests, and easing liquidity constraints in the banking system. The IMF’s emergency financing under the RCF is expected to help the authorities meet the large external financing gap and catalyze further assistance from the international community. Additional concessional donor support will be critical to close the remaining external financing gap and facilitate the needed interventions to ease the economic and social impacts of the pandemic, while preserving Malawi’s hard-earned macroeconomic stability. A widening of the budget deficit is appropriate in the near-term, given the fiscal costs associated with the economic slowdown and critical additional health care and social spending needs, which should be executed transparently and targeted to the most affected parts of society.
This paper assesses and disseminates experiences and lessons from low-income countries (LICs) in Sub-Saharan Africa that were selected by the Africa Department in 2015-16 as pilots for enhanced analysis of macro-financial linkages in Article IV staff reports. The paper focuses on the common characteristics across the pilot countries and highlights the tools used in the analysis, the challenges encountered, and the solutions deployed in overcoming them.
This 2018 Article IV Consultation highlights that the economy of Malawi recently rebounded from two years of drought. Growth picked up from 2.3 percent in 2016 to an estimated 4.0 percent in 2017 owing to a recovery in agricultural production. Inflation has been reduced below 10 percent owing to the stabilization of food prices, prudent fiscal and monetary policies, and a stable exchange rate. Economic growth is expected to increase gradually, reaching over 6 percent in the medium term. Growth will be supported by enhanced infrastructure investment and social services as well as an improved business environment, which will boost confidence and unlock the economy’s potential for higher, more broad-based, and resilient growth and employment.
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.
The Background Notes in this Supplement provide essential context and analysis needed to understand the problem of governance and corruption, its impact on the economies of Fund members, and the history and nature of Fund engagement on these issues. They also seek to support the assessment of the Fund’s overall approach to promoting good governance and reducing corruption—including through the lenses of key stakeholders—with a view to identifying strength and closing any remaining gaps.