Malawi: IMF Says Malawi Economy to Grow 7 Percent - 'Covid-19 Potential for Deeper Disruption'

24 March 2020

Malawi's economy recent economic performance has been favourable and the International Monetary Fund (IMF) says it is likely to expand by 6-7% this year, notwithstanding the effects of coronavirus on its economy.

IMF Mission Chief for Malawi, Pritha Mitra: With the evolution of the COVID-19 outbreak still largely unknown, the economic outlook is subject to substantial uncertainty.

IMF mission chief for Malawi Pritha Mitra said late on Tuesday that inflation is expected to fall to 9.3% in 2020 from 11.5% in 2019/

In a statement at the end of an IMF staff visit, Mitra said economic growth will be supported by "infrastructure that is more resilient to shocks from climate change, improved access to finance, crop diversification, and an improved business climate."

Inflation will decline as elevated food inflation moderates, gradually converging to 5% over the medium term.

Malawi's economy is largely reliant on sales of tobacco, tea and sugarcane, with growth having slowed in recent years because of an El Nino-induced drought, electricity shortages and political uncertainty.

Hwowever, IMF praised the authorities for regaining control over the budget in the first half of financial year 2019/20.

"The authorities are deploying measures to enhance spending efficiencies and address revenue shortfalls in the current fiscal year and they expect to shift to a positive domestic primary balance in the coming years.

" They are committed to repaying arrears accumulated in recent years and addressing shortfalls in the system that led to them. The government will continue enhancing tax policy and revenue administration. Strengthening transparency in the budget process, the medium-term budgetary framework, cash management, and routinized bank reconciliation as well as gradual upgrading of the existing public financial management system will be critical," reads the statement.

IMF pointed out that monetary policy remains focused on preserving price stability over the medium-term.

" Banking system resilience continues to improve, with non-performing loans (NPLs) declining over the last three years and improved 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."

But IMF said maintaining this performance for the second half of the fiscal year will be challenging.

"Pressures from COVID-19 and political uncertainties ahead of the new Presidential elections are weighing on revenues," Mitra said.

"Malawi's debt has risen but both its external and overall risk of debt distress remain 'moderate;."

In January, Malawi's central bank said gross domestic product would grow by as much as 6% in 2020 as the country recovered from drought and agricultural output rose.

IMF said it held meetings 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 national stakeholders outside government, as well as representatives of Malawi's development partners.

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