Lilongwe — The International Monetary Fund (IMF) has given a positive economic outlook for Malawi after conducting discussions with the Malawi Government on the second review of the three year arrangement under the Extended Credit Facility (ECF) amounting to US$112.3 million.
Mission Chief for Malawi, Pritha Mitra told journalists at Capital Hill in Lilongwe that Malawi's performance under the program has been good in spite of Malawi missing end December fiscal target balance which it attributed to front loading of budgeted expenditures and increases in spending to hold elections.
She further urged the government to focus on actions to ensure fiscal sustainability with particular focus on debt management and public financial management including undertaking regular bank reconciliations among others.
"These are all critical to overall improve the efficiency of how public finances are run and to achieve one of the objectives under the IMF program which is to gradually reduce the debt to GDP ratios.
"One way of reducing the debt is improving revenues and spending that really enhances growth. Those two strategies together would result in low budget deficit and gradually over time the deficits will be reduced and probably even have surpluses," she said.
According to IMF figures, Malawi's economic growth is projected to reach 5 percent in 2019 due to a rebound in agriculture and some improvement in electricity generation while inflation is expected to drop to around 8 percent at the end of 2019 and to 5 percent in the medium term.
However, Minister of Finance Goodall Gondwe said the government has decided not to complete the discussions because it will inject further expenditure into the budget to carter for the crisis in Lower Shire, but was optimistic that the government would complete the discussions under the ECF.
"We are doing quite well. We started very badly in 2014. We have managed to clean up all the disaster that befell us because of cash-gate. I think that is behind us now as far as figures are concerned. If we had not had bad climatic episodes, we would even have done better," said Gondwe.
The ECF provides financial assistance to countries with stretched balance of payments problems created under the Poverty Reduction and Growth Trust.
The discussions under the second review will continue in the weeks ahead including at the IMF's Spring Meetings from April 12 to 14 in Washington D.C. according to the IMF team.
The IMF team has been in Malawi since March 5, 2019.