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Africa > Malawi

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Cover Technical Assistance Reports
Malawi: Technical Assistance Report-Report on the Improving Estimates of Gross Domestic Product Mission (June 24–July 5, 2024)
International Monetary Fund. Statistics Dept.
The mission assisted the National Statistical Office of Malawi improve the quality of the published annual estimates of Gross Domestic Product (GDP), progressed the use of Value Added Tax (VAT) data as a basis for developing quarterly series and supported development of current price estimates of GDP based on the expenditure approach (GDP-E). Specially, the mission reviewed the quality of the published GDP series and finalized Supply and Use Tables for 2017. This allowed the development of annual current price estimates of GDP-E. In addition, the mission initiated estimation of quarterly current price estimates of GDP for some activities based on data for company sales from Malawi’s VAT system.
Keywords:
GDP; Supply and Use Tables; expenditure GDP; quarterly GDP; administrative data; value added tax; Malawi.; business processing documentation; STA Department; estimates of GDP-E; consumption expenditure; VAT data; Value-added tax; Consumer price indexes; Gross fixed investment
Cover IMF Notes
Agricultural Producer Subsidies: Navigating Challenges and Policy Considerations
David Amaglobeli
,
Todd Benson
, and
Tewodaj Mogues
The objectives underlying agricultural output subsidies can have conflicting implications for the design of subsidy programs. As they tend to affect meaningful swaths of the electorate, subsidies can also be an attractive political instrument. By artificially lowering production costs or assuring higher output prices, direct support measures can result in resource misallocation in instances where they fail to address market failures, such as imperfect information about the returns to fertilizers. Subsidies can also contribute to fertilizer overuse, harming the environment and the agricultural sector in the long term. Furthermore, agricultural production subsidies are often fiscally costly and unfavorable compared to alternative uses of public funds—both within the agricultural sector and outside it—to achieve the same ends. Various design and implementation challenges amplify the shortcomings of producer subsidy programs.
Keywords:
Agricultural subsidies; direct farmer support; payments to agricultural producers; producer subsidy; input subsidy program; IMF note 2024/002; output price subsidy; implementation challenge; Agricultural policy; Government subsidies; Agroindustries; Agricultural sector; Price incentives; Global; Sub-Saharan Africa
Cover Policy Papers
Review of Experience with The Food Shock Window Under The Rapid Financing Instrument and The Rapid Credit Facility
International Monetary Fund. Finance Dept.
,
International Monetary Fund. Legal Dept.
, and
International Monetary Fund. Strategy, Policy, & Review Department
The Food Shock Window (FSW) under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) was approved in September 2022 for 12 months, as a complement to the tools used by the Fund to support the broader international effort to address the global food shock. The Fund has been working closely with partners to provide a coordinated international response to the global food shock, and has contributed through policy advice, technical assistance and lending. Where needed and possible, financial support to countries affected by the global food shock has been delivered by the IMF through multi-year Fund-supported programs The FSW complemented this support in situations where these programs were not feasible or not necessary. As the global food shock and associated balance of payment pressures are expected to continue throughout 2023, the IMF extended the FSW until end-March 2024 to allow the FSW to continue serving as a contingency tool. This extension will also provide sufficient time to observe if the FSW can lapse without limiting the capacity of the Fund to support its members. To ensure adequate borrowing space under the emergency financing limits for those countries that have received support through the FSW, the IMF also extended the additional 25 percent of quota added to the Cumulative Access Limit until end-2026 for countries that have accessed the Food Shock Window through the RFI and until the completion of the 2024/25 PRGT review for those that accessed the Food Shock Window through the RCF.
Keywords:
Cumulative Access Limits; Rapid Financing Instrument; Rapid Credit Facility; Food Insecurity; FSW request; FSW financing; UCT-quality program; FSW relative; FSW experience; FSW resource; Food security; Food prices; Emergency assistance; Balance of payments need; Global
Cover IMF Staff Country Reports
Malawi: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Malawi
International Monetary Fund. African Dept.
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.
Keywords:
financing gap; fund advice; private sector investment; governance issue; fiscal policy stance; soft commodity; Debt sustainability; International reserves; Africa; Global; Sub-Saharan Africa
Cover Growth and Adjustment in IMF-Supported Programs
Growth and Adjustment in IMF-Supported Programs
International Monetary Fund. Independent Evaluation Office

Abstract

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.

Keywords:
IMF programs; growth optimism; austerity bias; structural conditionality; debt sustainability; fiscal policy; exchange rate policy; PRGT program; debt operation; IMF support; reviews IMF policy; program objective; Fiscal consolidation; Real effective exchange rates; Structural reforms; Global; Middle East and Central Asia; West Africa; Sub-Saharan Africa; Caribbean; Europe
Cover IMF Working Papers
How do Climate Shocks Affect the Impact of FDI, ODA and Remittances on Economic Growth?
Alassane Drabo
The three main financial inflows to developing countries have largely increased during the last two decades, despite the large debate in the literature regarding their effects on economic growth which is not yet clear-cut. An emerging literature investigates the dependence of their effects on some country characteristics such as human and physical capital constraint, macroeconomic policy and institutional capacity. This paper extends the literature by arguing that climate shocks may undermine the effect of Foreign Direct Investment (FDI), official development assistance (ODA) and migrants’ remittances on economic expansion. Based on neoclassical growth framework, the theoretical model indicates that FDI, ODA, and remittances improve economic growth, and the size of the effect increases with good absorptive capacity. However, climate shocks reduce this positive effect of financial flows in developing countries. Using a sample of low and middle-income countries from 1995 to 2018, the empirical investigation confirms the theoretical conclusions. Developing countries should build strong resilience to climate change. Actions are also needed at global level to reduce greenhouse gases emissions, and build strong structural resilience to climate shocks especially in developing countries.
Keywords:
inflows-economic growth nexus; effect of ODA; income group; role of Climate; effect of foreign direct investment; Climate change; Absorptive capacity; Foreign direct investment; Human capital; Middle East; East Asia; Asia and Pacific; North Africa; South Asia; Global
Cover IMF How To Notes
How to Assess the Benefits of Nonperforming Loan Disposal in Sub-Saharan Africa Using a Simple Analytical Framework
Irina Bunda
,
Luc Eyraud
, and
Zhangrui Wang
The coronavirus (COVID-19) crisis, which has hit financial systems across Africa, is likely to deteriorate banks’ balance sheets. The largest threat to banks pertains to their loan portfolios, since many borrowers have faced a sharp collapse in their income, and therefore have difficulty repaying their obligations as they come due. This could lead to a sharp increase in nonperforming loans (NPLs) in the short to medium term.
Keywords:
Nonperforming loan disposal; Excel template; disposal strategy; raise capital requirement; loan portfolio; management cost; Nonperforming loans; Loans; Distressed assets; Financial statements; Collateral; Sub-Saharan Africa; Africa
Cover IMF Staff Country Reports
Malawi: 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-Press Release; Staff Report; and Statement by the Executive Director for Malawi
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.
Keywords:
ISCR; CR; ECF arrangement; SDR; resilience to climate change; Malawi's resilience; reconstruction; equivalent of SDR; debt service; Fiscal stance; Africa; Global; IMF's transparency policy; IMF arrangement
Cover IMF Staff Country Reports
Malawi: First Review Under the Three-Year Extended Credit Facility Arrangement and Requests for Modification and Waivers of Nonobservance of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Malawi
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.
Keywords:
ISCR; CR; ECF arrangement; anti-corruption effort; support governance reform; exchange rate; budget support; feasibility study; tax reform measure; Fiscal stance; Budget planning and preparation; Global; Africa
Cover Policy Papers
Guidance Note on IMF Engagement on Social Safeguards in Low-Income Countries
International Monetary Fund. Strategy, Policy, &amp
and
Review Department
This note provides operational guidance to staff on how to engage on social safeguard issues with low-income countries in both program and surveillance contexts. The note is not intended as a comprehensive guide, and should be used in conjunction with other operational guidance notes, such as those relating to conditionality and surveillance.
Keywords:
PP; spending; staff; poverty; spending floor; priority spending; country authorities; expenditure code; address weakness; Social assistance spending; Social protection spending; Education spending; Poverty reduction; Energy subsidies; Africa