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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 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 Departmental Papers
Macro-Financial Linkages in Shallow Markets: Experience from the African Department’s Pilot Countries
International Monetary Fund. African Dept.
This paper assesses and disseminates experiences and lessons from low-income countries (LICs) in Sub-Saharan Africa that were selected by the Africa Department in 2015-16 as pilots for enhanced analysis of macro-financial linkages in Article IV staff reports. The paper focuses on the common characteristics across the pilot countries and highlights the tools used in the analysis, the challenges encountered, and the solutions deployed in overcoming them.
Keywords:
DPPP; DP; interest rate; credit risk; central bank; banking sector; bank competition; cost of funds; composite index; lending condition; Malawian bank; economic value; bank information cost; financial system assets; banking system assets; bank level; banks in Benin; bank agent; Financial sector development; Financial sector; Stress testing; Credit; Sub-Saharan Africa; East Africa; Middle East; East Asia
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 Staff Discussion Notes
Macro-Structural Policies and Income Inequality in Low-Income Developing Countries
Ms. Stefania Fabrizio
,
Davide Furceri
,
Mr. Rodrigo Garcia-Verdu
,
Ms. Grace B Li
,
Mrs. Sandra V Lizarazo Ruiz
,
Ms. Marina Mendes Tavares
,
Mr. Futoshi Narita
, and
Adrian Peralta
Despite sustained economic growth and rapid poverty reductions, income inequality remains stubbornly high in many low-income developing countries. This pattern is a concern as high levels of inequality can impair the sustainability of growth and macroeconomic stability, thereby also limiting countries’ ability to reach the Sustainable Development Goals. This underscores the importance of understanding how policies aimed at boosting economic growth affect income inequality. Using empirical and modeling techniques, the note confirms that macro-structural policies aimed at raising growth payoffs in low-income developing countries can have important distributional consequences, with the impact dependent on both the design of reforms and on country-specific economic characteristics. While there is no one-size-fits-all recipe, the note explores how governments can address adverse distributional consequences of reforms by designing reform packages to make pro-growth policies also more inclusive.
Keywords:
SDN; productivity; rate; revenue; Income inequality; growth; macro-structural policies; resource mobilization; infrastructure investment; financial sector reform; financial inclusion; agriculture; cash transfer program; higher-productivity sector; inequality in low-income developing countries; productivity gap; cost of capital; income fluctuation; Value-added tax; Income; Agricultural sector; Income distribution; Caribbean
Cover IMF Working Papers
How Buoyant is the Tax System? New Evidence from a Large Heterogeneous Panel
Mr. Paolo Dudine
and
João Tovar Jalles
In this paper we provide short- and long-run tax buoyancy estimates for 107 countries (distributed between advanced, emerging and low-income) for the period 1980–2014. By means of Fully-Modified OLS and (Pooled) Mean Group estimators, we find that: i) for advanced economies both long-run and short-run buoyancies are not different from one; ii) long run tax buoyancy exceeds one in the case of CIT for advanced economies, PIT and SSC in emerging markets, and TGS for low income countries, iii) in advanced countries (emerging market economies) CIT (CIT and TGS) buoyancy is larger during contractions than during times of economic expansions; iv) both trade openness and human capital increase buoyancy while inflation and output volatility decrease it.
Keywords:
WP; tax buoyancy; tax revenue; buoyancy estimate; buoyancies help; tax elasticity; recession; error correction model; pooled mean group; short vs long run; fiscal sustainability; buoyancy coefficient; tax category; Corporate income tax; Personal income tax; Inflation; Emerging and frontier financial markets; Global