The International Monetary Fund (IMF) mission to Malawi has said the country’s general economic performance is on track and the country can do much better if government can improve debt and public financial management as well as restore budget balance to correct last year’s spending overruns, among other suggestions.
The IMF mission, which has been in the country for the past week, said this in Lilongwe yesterday at a joint press briefing with the Minister of Finance, Economic Planning and Development Goodall Gondwe.
The IMF team, led by Pritha Mitra, the Mission Chief to Malawi, was in the country from September 25 to conduct discussions on the first review of a $112.3 million three-year programme for Malawi under the Extended Credit Facility (ECF)
“The IMF team reached a staff-level agreement with the authorities of Malawi on the completion of the first review under the ECF, which is subject to the approval of the IMF Executive Board.
“Malawi’s economy continues to grow while inflation remains on a declining trend. Moderate economic growth is likely to strengthen to about 4 percent in 2019, followed by a rise to 6-7 percent over the medium term. Growth will be backed by improved electricity generation, better irrigation infrastructure and cropping techniques, greater access to finance, and an improved business climate. Inflation is expected to reach 9.5 percent at end-2018, before gradually converging to around 5 percent over the medium term,” Mitra said in a statement.
She said performance under the programme has been good.
“Most quantitative performance criteria [QPC] for end-June were met, with the criteria on international reserves and the Reserve Bank of Malawi’s holdings of government securities significantly overperforming. The target on the primary balance [such as fiscal balance that excludes interest payments] was missed due to larger-than-expected maize purchases—to ensure food security after poor maize harvests in some parts of the country—and increases in spending to hold elections. Two structural benchmarks were met on time and most of the rest were met with a delay. This was, in part, due to capacity constraints, which are being addressed,” she added.
At the press briefing, she maintained that while the country is facing challenges, including power outages and high level internal debt, the government is implementing appropriate fiscal policies.
The highlighted positives were so much to the liking of purse-keeper Gondwe, who in all his responses at the briefing, was on the defensive that the country’s economy was ‘performing remarkably well’.
He said: “There is a lot that government is doing to improve the situation but most Malawians including the media focus only on what is not working.”
However, Gondwe conceded on poor debt management, saying: “This is one area that Capital [Hill] is seriously looking into.”
He also said government welcomes suggestions from the IMF and they will work towards addressing the identified gaps.
According to Mitra, the team will, a month from now, meet with IMF directors to approve the second disbursement of the loan which is part of the ECF programme.
The team met with Gondwe, Governor of the Reserve Bank of Malawi (RBM) Dalitso Kabambe, other senior government and RBM officials, a broad range of national stakeholders outside government, as well as representatives from Malawi’s development partners.