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Africa > Malawi

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Cover IMF Staff Country Reports
Malawi: Second Review Under the Staff-Monitored Program with Executive Board Involvement and Request for an Arrangement Under the Extended Credit Facility-Press Release; Staff Report
International Monetary Fund. African Dept.
This paper discusses Malawi’s Second Review under the Staff-Monitored Program with Executive Board Involvement (PMB) and Request for an Arrangement under the Extended Credit Facility (ECF). Malawi continues to face a challenging macroeconomic environment. Years of unsustainable domestic and external borrowing and the adverse impact of multiple external shocks have resulted in the widening of macroeconomic imbalances, including protracted balance of payment needs. The ECF-supported program will support the authorities’ macroeconomic adjustment and reform agenda aimed at restoring macroeconomic stability, building a foundation for inclusive and sustainable growth, and addressing weaknesses in governance. Further delays in the restructuring of Malawi’s external debt would put at risk macroeconomic stabilization. The risks of moving forward with the ECF arrangement without an agreement in principle between the Malawian authorities and their commercial creditors are significant. IMF staff assesses that the PMB remains on track to achieve its objectives. It supports the authorities’ request for the ECF arrangement, conditional upon receipt of financing assurances.
Keywords:
authorized dealer banks; ECF arrangement; staff appraisal; executive board involvement; financing gap; Debt service; International reserves; Global; Africa; Sub-Saharan Africa
Cover IMF Staff Country Reports
Malawi: First Review Under the Staff-Monitored Program with Executive Board Involvement-Press Release; Staff Report; and Statement by the Executive Director for Malawi
International Monetary Fund. African Dept.
This paper presents Malawi’s First Review under the Staff-Monitored Program with Executive Board (PMB) Involvement. In light of a series of shocks, program performance was mixed. The authorities are taking corrective actions to establish a record of accomplishment of policy implementation, possibly paving the way to an Extended Credit Facility (ECF) arrangement. Cyclone Freddy has weighed on the outlook for 2023 and led to a lower growth forecast and a higher inflation forecast. Key downside risks include slippages in program implementation, delays in the ongoing external debt restructuring process, and further external shocks. Performance on Quantitative Targets (QTs), Indicative Targets (ITs), and Structural Benchmarks was mixed, with four out of six end-December and continuous QTs and one out of three end-December ITs not met. Four out of seven Structural Benchmarks were not met. The authorities have committed to strong corrective actions. The authorities are taking corrective actions necessary to overcome mixed performance and implementation challenges with the PMB to date, allowing them to demonstrate their commitment and capacity to implement the agreed macroeconomic adjustment and reforms to build the policy record of accomplishment needed to support their request for an ECF arrangement.
Keywords:
restructuring strategy; monitoring of program performance; price discovery; policy track record; government Finance Statistics Manual; FX swap rollover risk; Debt service; International reserves; Global
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
Understanding Inflation in Malawi: A Quantitative Investigation
Dong Frank Wu
This paper focuses on the role of the pass-through of the exchange rate and policydeterminants in driving inflation. Using linear and nonlinear frameworks, the paper finds: (i) after the switch to a floating exchange rate regime in 2012, nonfood prices not only directly influence headline inflation, but also have an significant impact on food inflation via second round effects; (ii) the pass-through of the exchange rate to headline inflation has jumped from zero to 11 percent under the floating regime, after controlling for other factors; (iii) the improved significance of T-bill rates in shaping inflation flags its importance in Malawi’s monetary framework although the monetary transmission mechanism needs further strengthening; (iv) the increased impact of broad money underscores the necessity for fiscal discipline and central bank independence.
Keywords:
WP; headline inflation; Inflation; Exchange Rate; Pass-through; Regime Switch; food inflation; inflation dynamics; inflation volatility; inflation expectation; T-bill rate; inflation fluctuation; exchange rate expectation; Exchange rate arrangements; Monetary base; Exchange rates; Floating exchange rates; Global
Cover IMF Staff Country Reports
Malawi: First Review Under the Extended Credit Facility Arrangement, Request for Waiver of Performance Criterion, and Modification of Performance Criteria—Staff Report; Informational Annex; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Malawi
International Monetary Fund. African Dept.
This collection of papers reviews Malawi’s economic performance under a program supported by the Extended Credit Facility (ECF). Drought conditions in parts of the country have dampened the near-term outlook for growth and have resulted in food insecurity for nearly 2 million inhabitants. The authorities have therefore implemented strong adjustment measures to address Malawi’s substantial external and internal imbalances. The IMF Executive Board has also decided to enable the immediate disbursement of an amount equivalent to SDR 13.02 million (about US$20 million), bringing total disbursements under the program to an amount equivalent to SDR 26.04 million (about US$40.1 million), which will help Malawi to accelerate growth under the ECF.
Keywords:
ISCR; CR; development partner; government; authority; monetary policy; Malawi authorities; restructuring plan; net domestic assets; implementation of the Extended Credit Facility; Exchange rates; International reserves; Global
Cover IMF Working Papers
Exchange Rate Liberalization in Selected Sub-Saharan African Countries Successes, Failures, and Lessons
Mr. Nils O Maehle
,
Ms. Haimanot Teferra
, and
Mrs. Armine Khachatryan
Many sub-Saharan African (SSA) countries liberalized their economies in the 1980s and early 1990s. This paper reviews the foreign exchange regime reforms in selected SSA, and their associated macroeconomic policies and economic performance during and after these reforms were undertaken. Before liberalization, most of the reviewed countries were characterized by extensive foreign exchange rationing, sizeable black market premiums, and declining per capita real income. Today, the countries that successfully reformed look markedly different. Rationing and parallel market spreads are a distant memory, and per capita income has increased sharply.
Keywords:
WP; exchange rate; U.S. dollar; government; country; headline inflation; proceeds; Exchange rate regimes; reforms; growth; inflation; structural adjustment; managed float; per capita income; inflation rate; exchange rate liberalization; stabilization effort; exchange rate depreciation; U.S. dollar exchange rate; adjustable peg; auction market; overvalued exchange rate; Exchange rates; Exchange rate arrangements; Currency markets; Sub-Saharan Africa
Cover IMF Staff Country Reports
Malawi: 2012 Article IV Consultation and Request for a New Arrangement Under the Extended Credit Facility: Staff Report; Staff Supplements; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Malawi.
International Monetary Fund
The Malawian economy is slowly recovering, thanks to corrective measures such as the floating exchange rate regime and liberated current account transactions. Stringent fiscal discipline, restrained monetary policies, and boosting of international reserves have been suggested as measures for controlling inflation and stabilizing the macroeconomy. Operation power and freedom for results-based management (RBM) and implementation of Malawi Growth and Development Strategy II (MGDS-II) are also suggested by the Executive Board. Measures to ensure revenue gain concurrent with spending have also been recommended.
Keywords:
ISCR; CR; ECF arrangement; government; devaluation; equivalent; current account transaction; second growth; amount equivalent to SDR; anchor inflation expectation; floating exchange rate regime; prudent fiscal policy; International reserves; Budget planning and preparation; Imports; Global
Cover IMF Working Papers
The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa
Ms. Janet Gale Stotsky
,
Mr. Manuk Ghazanchyan
,
Mr. Olumuyiwa S Adedeji
, and
Mr. Nils O Maehle
This study examines the relationship between the foreign exchange regime and macroeconomic performance in Eastern Africa. The study focuses on seven countries, five of which decisively liberalized their foreign exchange regimes. The study assesses the relationship between (i) growth and various determinants, including the exchange regime, the real exchange rate, and current account liberalization; and (ii) inflation and various determinants, including lagged inflation, the nominal exchange rate, the exchange regime, and liberalization. We find that in our sample, for the determinants of growth, investment and the real exchange rate are significant determinants but not the exchange regime or liberalization; and for inflation, the lagged inflation rate, nominal exchange rate, and the de facto regime are significant. Exchange rate pass-through is limited.
Keywords:
WP; exchange rate regime; foreign exchange regime; regime classification; pass-through coefficient; Exchange rate reforms and regimes; growth; and inflation; low-inflation regime; descriptive analysis; overvalued exchange rates; Exchange rate arrangements; Inflation; Exchange rate pass-through; Exchange rates; East Africa
Cover IMF Working Papers
Global Shocks and their Impacton Low-Income Countries: Lessons From theglobal Financial Crisis
Mr. Chris Papageorgiou
,
Hans Weisfeld
,
Ms. Catherine A Pattillo
,
Mr. Martin Schindler
,
Mr. Nikola Spatafora
, and
Mr. Andrew Berg
This paper investigates the short-run effects of the 2007-09 global financial crisis on growth in (mainly non-fuel exporting) low-income countries (LICs). Four conclusions stand out. First, for many individual LICs, 2009 was not extraordinarily calamitous; however, aggregate LIC output declined sharply because LICs were unusually synchronized. Second, the growth declines are on average well explained by the decline in export demand. Third, if the external environment facing LICs improves as forecast, their growth should rebound sharply. Finally, and contrary to received wisdom, there are few robust relationships between the cross-country growth variation and the policy and structural environment; the main exceptions are reserve coverage and labor-market flexibility.
Keywords:
WP; growth rate; Per-Capita GDP Growth; Global financial crisis; Low-income countries; External shocks; Short-run growth; external demand; non-fuel-exporting middle-income countries; regression analysis; demand growth; FDI shock; terms of trade growth; Terms of trade; Foreign direct investment; Production growth; Labor market flexibility; Exchange rate arrangements; Global
Cover IMF Staff Country Reports
Malawi: Staff Report for 2009 Article IV Consultation and Request for a Three-Year Arrangement Under the Extended Credit Facility
International Monetary Fund
This 2009 Article IV Consultation highlights that Malawi’s macroeconomic performance has improved significantly over the past two years, and the country’s agricultural-based economy has weathered the global economic storm relatively well. Good weather and the distribution of subsidized fertilizer have contributed to robust growth and moderate inflation in recent years. Malawi’s medium-term outlook is favorable, within the context of successful implementation of the Extended Credit Facility-supported program. Growth is expected to remain buoyant, but moderate somewhat relative to the high growth of the recent past.
Keywords:
ISCR; CR; Malawi; repayment target; donor disbursement delay; exchange rate appreciation; services expenditure; consumer price inflation; article IV consultation discussion; Exchange rates; Currency markets; Current account; Budget planning and preparation; Global