Context

1. Malawi’s macroeconomic situation remains difficult. The economy has been hit hard by drought for a second consecutive year, and this has contributed to weak economic activity, and placed almost half of the population at risk of food insecurity. In 2015, donors and the authorities provided relief to 2.8 million people but the situation has worsened as the drought has become more pronounced. The large policy slippages that emerged in 2015 contributed to the persistence of inflation which has remained in double digits since 2012 and continues to pose a challenge to macroeconomic stability.

2. Progress was made in prosecuting suspects in the “cashgate scandal” (MEFP ¶13). To date, there have been eleven convictions including that of the main suspect who was charged with embezzling an estimated US$10 million, but asset recovery has been slow.

3. The program went off track due to policy slippages which prevented the completion of the seventh review (end-June 2015 test date). Both end-June 2015 targets on net domestic assets (NDA) and net international reserves of the central bank (RBM) were met, but net domestic financing (NDF) was missed by a large margin (2 percent of GDP), mainly due to the unplanned recruitment of teachers, unbudgeted wage increases, and revenue shortfalls. All public financial management (PFM)-related structural benchmarks—the centerpiece of the program’s structural agenda—were also missed. However, good progress was made in implementing those structural measures related to the financial sector.

Recent Economic Developments

4. Growth fell sharply in 2015. Heavy floods in early 2015 followed by drought resulted in an estimated 30 percent decline in the maize harvest which contributed to a drop in real GDP growth to 3 percent (from 5.7 percent in 2014). Real GDP growth in 2016 is expected to drop further to 2.7 percent, based on another poor maize harvest owing to the region-wide El Niño-induced drought.

Malawi: Decomposition of Headline Inflation

(Dec. 2014–Apr. 2016)

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Sources: Malawian authorities and IMF staff estimates.

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Malawi: Decomposition of Headline Inflation

(Dec. 2014–Apr. 2016)

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Sources: Malawian authorities and IMF staff estimates.

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Malawi: Decomposition of Headline Inflation

(Dec. 2014–Apr. 2016)

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Sources: Malawian authorities and IMF staff estimates.

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5. Inflation rose sharply reflecting the impact of weather-related shocks on agricultural output. Annual inflation increased from 18 percent in March to 24.9 percent at end-December 2015 led by rising food prices and a sharp depreciation of the kwacha. However, inflation has since fallen to 20.9 percent at end-April 2016—owing to a trend decline in non-food inflation—suggesting that the appropriate adjustments in monetary and fiscal policies are having their intended effects.

6. The exchange rate weakened dramatically from mid-2015, but has now stabilized (Text Figure 2). The kwacha depreciated by close to 36 percent from July 2015 to February 2016, following a similar trend in other regional commodity-dependent countries. The RBM intervened during this period to dampen volatility. Expectations played a role in the depreciation as the ECF arrangement was declared off-track. The exchange rate has started to stabilize since March 2016, reflecting better fiscal discipline, and efforts by the central bank to absorb excess liquidity from the banking system and maintain positive real interest rates.

Regional Currencies vs. the U.S. Dollar

(Jan 1^st, 2014=100)

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Source: IMF staff estimates.

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Regional Currencies vs. the U.S. Dollar

(Jan 1^st, 2014=100)

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Source: IMF staff estimates.

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Regional Currencies vs. the U.S. Dollar

(Jan 1^st, 2014=100)

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Source: IMF staff estimates.

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7. Money and credit conditions remained weak. Reserve and broad money growth have been on a declining trend reflecting policy tightening. Broad money and credit to the private sector grew by 14 percent and 18 percent respectively, after adjusting for the valuation effects from the recent depreciation of the kwacha. Growth in real credit has remained negative since mid-2012 due to persistently high inflation, economic uncertainties, and tighter bank lending conditions (Figure 2). The valuation effect also played a significant role in the decline in the ratio of non-performing loans (NPLs) to gross loans in 2015, by 4 percentage points (Table 5).

Malawi: Recent Monetary Developments, 2011–15

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Sources: Malawian authorities and IMF staff estimates.

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Malawi: Recent Monetary Developments, 2011–15

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Sources: Malawian authorities and IMF staff estimates.

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Malawi: Recent Monetary Developments, 2011–15

Citation: IMF Staff Country Reports 2016, 182; 10.5089/9781498318228.002.A001

Sources: Malawian authorities and IMF staff estimates.

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Table 1.

Malawi: Selected Economic Indicators, 2012–19

(with rebased nominal GDP)

Sources: Malawian authorities and IMF staff projections.

¹The current GDP base year is 2010.

²The fiscal year starts in July and ends in June. The current fiscal year, 2016, runs from July 1, 2015 to June 30, 2016.

³Numbers reflect re-classification of project and dedicated grants from current account to capital account.

Table 1.

Malawi: Selected Economic Indicators, 2012–19

(with rebased nominal GDP)

				2012	2013	2014	2015	2016	2017	2018	2019
26-May-16				Act.			Est.	Proj.
National accounts and prices (percent change, unless otherwise indicated)
	GDP at constant market prices			1.9	5.2	5.7	3.0	2.7	4.5	5.0	5.5
	Nominal GDP (billions of Kwacha)1			1,502	2,011	2,570	3,203	3,892	4,601	5,230	5,932
	GDP deflator			17.7	27.3	20.9	21.0	18.3	13.1	8.3	7.5
	Consumer prices (end of period)			34.6	23.5	24.2	24.9	15.8	9.9	8.9	8.6
	Consumer prices (annual average)			21.3	28.3	23.8	21.9	19.7	14.1	9.4	8.7
Investment and savings (percent of GDP)
	National savings			2.8	4.0	3.5	3.2	−0.4	4.5	6.1	6.4
	Gross investment			12.1	12.7	12.0	11.4	13.6	13.2	14.1	14.0
		Government		5.8	5.3	4.6	4.6	6.5	6.0	6.7	6.5
		Private		6.3	7.4	7.5	6.8	7.0	7.2	7.4	7.5
	Saving-investment balance			−9.3	−8.7	−8.5	−8.2	−13.9	−8.8	−8.0	−7.7
Central government (percent of GDP on a fiscal year basis)2
	Revenue			18.7	27.5	22.8	21.4	22.5	21.5	21.7	21.8
		Tax and nontax revenue		15.6	17.3	19.7	18.6	18.6	18.6	18.8	18.8
		Grants		3.1	10.2	3.1	2.8	3.9	2.9	2.9	2.9
	Expenditure and net lending			23.5	28.5	28.9	27.9	28.6	26.4	24.4	24.4
	Overall balance (excluding grants)			−7.9	−11.2	−9.2	−9.3	−10.0	−7.9	−5.6	−5.6
	Overall balance (including grants)			−4.8	−1.0	−6.1	−6.5	−6.1	−5.0	−2.7	−2.6
		Foreign financing		1.1	1.9	2.0	2.5	3.1	2.3	2.1	2.1
		Total domestic financing		4.7	−0.1	4.2	4.1	2.6	2.3	0.6	0.5
		Financing gap		0.0	0.0	0.0	0.0	0.4	0.5	0.0	0.0
	Discrepancy			−1.1	−0.8	−0.1	0.0	0.0	0.0	0.0	0.0
Money and credit (change in percent of broad money at the beginning of the period, unless otherwise indicated)
	Money and quasi money			22.9	35.1	20.7	23.7	16.7	16.9	21.7	23.6
	Net foreign assets			9.3	26.5	20.6	15.5	−1.8	5.1	9.8	9.8
	Net domestic assets			13.6	8.6	0.1	8.1	18.4	11.8	11.9	13.8
			Credit to the government	0.0	11.3	−5.9	8.1	10.1	3.3	2.3	2.1
	Credit to the private sector (percent change)			25.4	14.4	20.0	29.9	20.3	18.9	20.3	22.2
External sector (US$ millions, unless otherwise indicated)
	Exports (goods and services)			1,421	1,657	1,737	1,616	1,670	1,747	1,871.7	2,005.7
	Imports (goods and services)			2,281	2,315	2,399	2,284	2,604	2,476	2,590.5	2,736.8
	Gross official reserves			236	397	588	670	660	705	782.0	889.9
		(months of imports)		1.2	2.0	3.1	3.4	3.2	3.3	3.4	3.6
		(percent of reserve money)		69.1	108.3	130.3	216.2	181.0	161.0	155.0	151.6
	Current account (percent of GDP)3			−9.3	−8.7	−8.5	−8.2	−13.9	−8.8	−8.0	−7.7
	Current account, excl. official transfers (percent of GDP)3			−12.3	−10.0	−8.5	−8.6	−13.9	−8.7	−7.9	−7.7
	Real effective exchange rate (percent change)			−17.9	−14.9	8.8	14.3	…	…	…	…
	Overall balance (percent of GDP)			1.6	3.1	2.7	0.9	−1.5	0.4	1.4	1.6
	Financing gap			0.0	0.0	0.0	0.0	48.5	42.6	0.0	0.0
	Terms of trade (percent change)			−3.0	1.1	2.2	13.5	5.9	−4.6	−2.1	−3.0
Debt stock and service (percent of GDP, unless otherwise indicated)
	External debt (public sector)			26.5	30.8	33.1	37.0	33.2	29.1	29.2	29.3
	NPV of external debt (percent of exports)			53.3	77.3	102.9	110.9	86.4	83.0	82.7	82.0
	Domestic public debt			13.8	19.8	14.9	16.8	18.9	18.0	15.5	13.3
	Total public debt			40.2	50.6	48.0	53.8	52.1	47.1	44.7	42.5
	External debt service (percent of exports)			1.4	1.7	4.3	5.2	11.8	9.6	5.3	4.5
	External debt service (percent of revenue excl. grants)			2.1	2.8	6.6	7.2	18.3	12.7	7.4	6.1
	91-day treasury bill rate (end of period)			20.0	32.3	26.9	22.2	…	…	…	…

Sources: Malawian authorities and IMF staff projections.

¹The current GDP base year is 2010.

²The fiscal year starts in July and ends in June. The current fiscal year, 2016, runs from July 1, 2015 to June 30, 2016.

³Numbers reflect re-classification of project and dedicated grants from current account to capital account.

View Table

Table 1.

Malawi: Selected Economic Indicators, 2012–19

(with rebased nominal GDP)

				2012	2013	2014	2015	2016	2017	2018	2019
26-May-16				Act.			Est.	Proj.
National accounts and prices (percent change, unless otherwise indicated)
	GDP at constant market prices			1.9	5.2	5.7	3.0	2.7	4.5	5.0	5.5
	Nominal GDP (billions of Kwacha)1			1,502	2,011	2,570	3,203	3,892	4,601	5,230	5,932
	GDP deflator			17.7	27.3	20.9	21.0	18.3	13.1	8.3	7.5
	Consumer prices (end of period)			34.6	23.5	24.2	24.9	15.8	9.9	8.9	8.6
	Consumer prices (annual average)			21.3	28.3	23.8	21.9	19.7	14.1	9.4	8.7
Investment and savings (percent of GDP)
	National savings			2.8	4.0	3.5	3.2	−0.4	4.5	6.1	6.4
	Gross investment			12.1	12.7	12.0	11.4	13.6	13.2	14.1	14.0
		Government		5.8	5.3	4.6	4.6	6.5	6.0	6.7	6.5
		Private		6.3	7.4	7.5	6.8	7.0	7.2	7.4	7.5
	Saving-investment balance			−9.3	−8.7	−8.5	−8.2	−13.9	−8.8	−8.0	−7.7
Central government (percent of GDP on a fiscal year basis)2
	Revenue			18.7	27.5	22.8	21.4	22.5	21.5	21.7	21.8
		Tax and nontax revenue		15.6	17.3	19.7	18.6	18.6	18.6	18.8	18.8
		Grants		3.1	10.2	3.1	2.8	3.9	2.9	2.9	2.9
	Expenditure and net lending			23.5	28.5	28.9	27.9	28.6	26.4	24.4	24.4
	Overall balance (excluding grants)			−7.9	−11.2	−9.2	−9.3	−10.0	−7.9	−5.6	−5.6
	Overall balance (including grants)			−4.8	−1.0	−6.1	−6.5	−6.1	−5.0	−2.7	−2.6
		Foreign financing		1.1	1.9	2.0	2.5	3.1	2.3	2.1	2.1
		Total domestic financing		4.7	−0.1	4.2	4.1	2.6	2.3	0.6	0.5
		Financing gap		0.0	0.0	0.0	0.0	0.4	0.5	0.0	0.0
	Discrepancy			−1.1	−0.8	−0.1	0.0	0.0	0.0	0.0	0.0
Money and credit (change in percent of broad money at the beginning of the period, unless otherwise indicated)
	Money and quasi money			22.9	35.1	20.7	23.7	16.7	16.9	21.7	23.6
	Net foreign assets			9.3	26.5	20.6	15.5	−1.8	5.1	9.8	9.8
	Net domestic assets			13.6	8.6	0.1	8.1	18.4	11.8	11.9	13.8
			Credit to the government	0.0	11.3	−5.9	8.1	10.1	3.3	2.3	2.1
	Credit to the private sector (percent change)			25.4	14.4	20.0	29.9	20.3	18.9	20.3	22.2
External sector (US$ millions, unless otherwise indicated)
	Exports (goods and services)			1,421	1,657	1,737	1,616	1,670	1,747	1,871.7	2,005.7
	Imports (goods and services)			2,281	2,315	2,399	2,284	2,604	2,476	2,590.5	2,736.8
	Gross official reserves			236	397	588	670	660	705	782.0	889.9
		(months of imports)		1.2	2.0	3.1	3.4	3.2	3.3	3.4	3.6
		(percent of reserve money)		69.1	108.3	130.3	216.2	181.0	161.0	155.0	151.6
	Current account (percent of GDP)3			−9.3	−8.7	−8.5	−8.2	−13.9	−8.8	−8.0	−7.7
	Current account, excl. official transfers (percent of GDP)3			−12.3	−10.0	−8.5	−8.6	−13.9	−8.7	−7.9	−7.7
	Real effective exchange rate (percent change)			−17.9	−14.9	8.8	14.3	…	…	…	…
	Overall balance (percent of GDP)			1.6	3.1	2.7	0.9	−1.5	0.4	1.4	1.6
	Financing gap			0.0	0.0	0.0	0.0	48.5	42.6	0.0	0.0
	Terms of trade (percent change)			−3.0	1.1	2.2	13.5	5.9	−4.6	−2.1	−3.0
Debt stock and service (percent of GDP, unless otherwise indicated)
	External debt (public sector)			26.5	30.8	33.1	37.0	33.2	29.1	29.2	29.3
	NPV of external debt (percent of exports)			53.3	77.3	102.9	110.9	86.4	83.0	82.7	82.0
	Domestic public debt			13.8	19.8	14.9	16.8	18.9	18.0	15.5	13.3
	Total public debt			40.2	50.6	48.0	53.8	52.1	47.1	44.7	42.5
	External debt service (percent of exports)			1.4	1.7	4.3	5.2	11.8	9.6	5.3	4.5
	External debt service (percent of revenue excl. grants)			2.1	2.8	6.6	7.2	18.3	12.7	7.4	6.1
	91-day treasury bill rate (end of period)			20.0	32.3	26.9	22.2	…	…	…	…

Sources: Malawian authorities and IMF staff projections.

¹The current GDP base year is 2010.

²The fiscal year starts in July and ends in June. The current fiscal year, 2016, runs from July 1, 2015 to June 30, 2016.

³Numbers reflect re-classification of project and dedicated grants from current account to capital account.

Table 2a.

Malawi: Central Government Operations, 2012/13–2018/19

(Billions of Kwacha)

Sources: Malawi Ministry of Finance and IMF staff projections.

¹Data from the IMF Country Report No. 15/83.

²Nontax revenues in 2013/14 and 2014/15 include the RBM profit transfer to government of MK19.2 billion and MK25.4 billion, respectively.

³This includes promissory notes issued for the repayment of domestic arrears accumulated before FY2014/15.

⁴Other external loans in FY2014/15 include program loans from the World Bank for the financing of agriculture and education SWAPs and the National AIDS Commission (NAC).

⁵Domestic fiscal balance is calculated by subtracting current and domestically-financed development expenditures from domestic revenues.

Table 2a.

Malawi: Central Government Operations, 2012/13–2018/19

(Billions of Kwacha)

							2012/13	2013/14	2014/15	2015/16			2016/17		2017/18	2018/19
26-May-16							Actual	Actual	Actual	Prog.1	Revised Budget	Proj.	Prelim. budget	Proj.	Proj.
Revenue							472	511	610	774	792	792	905	905	1,062	1,209
		Tax and nontax revenue					297	441	530	648	655	655	784	784	920	1,046
			Tax Revenue				269	388	463	579	583	583	709	709	832	944
				Taxes on income and profits			129	181	233	289	304	304	393	393	455	517
				Taxes on goods and services			111	168	189	237	234	234	264	264	312	354
				Taxes on international trade			33	41	46	63	55	55	58	58	71	80
				Other taxes			−4	−2	−6	−10	−9	−9	−5	−5	−6	−7
			Nontax revenue 2				28	53	67	69	72	72	75	75	89	102
		Grants					176	70	79	126	137	137	122	122	141	163
			Budget support grants				78	7	0	7	21	21	0	0	0	0
			Project grants				35	41	48	76	68	68	73	73	77	85
			Dedicated grants				64	22	32	43	49	49	49	49	64	78
Expenditure and net lending							489	647	794	841	987	1,006	1,096	1,116	1,196	1,355
		Current expenditure					385	547	642	650	749	768	842	862	879	972
			Wages and salaries				97	140	197	193	222	222	261	261	313	360
			Interest payments				33	98	115	108	116	116	144	144	128	109
					Domestic		29	94	108	90	106	105	132	132	114	93
					Foreign		4	4	7	19	11	11	12	12	13	16
			Goods and services				144	176	158	184	190	203	211	231	254	294
					Generic goods and services		60	65	78	77	75	75	82	82	95	108
					Road Maintenance		7	8	9	11	21	21	21	21	30	36
					Agricultural SWAP			9	0	2	7	7	8	8	9	10
					Health SWAP		32	20	23	37	32	32	38	38	44	52
					Education SWAP		22	19	23	29	21	21	25	25	28	33
					National / local elections		1	11	1	1	1	1	2	2	2	2
					PFEM			3	1	1	4	4	4	4	4	4
					Statutory expenditures		6	7	8	3	6	6	5	5	6	6
					National AIDS Commission		5	9	3	5	8	8	13	13	15	16
					Maize purchases		3	14	5	6	9	22	5	25	12	13
					Rural Electrification Program		8	10	6	11	6	6	9	9	10	12
			Subsidies and other current transfers				98	125	139	165	172	172	166	166	184	209
					Pension and gratuities		16	20	31	30	43	43	50	50	58	66
					Transfers to road and revenue authorities		8	13	14	17	13	13	21	21	25	28
					Transfers to public entities and households		22	32	39	42	53	53	55	55	55	62
					Fertilizer and seed subsidy		52	60	55	75	64	64	40	40	46	53
						Of which: seed subsidy	6	9	4	…	9	9	10	10	11	13
			Arrears payments3				12	8	33	0	48	54	60	60	0	0
					of which: bonds for securitizing domestic arrears				22	0	48	54	55	55	0	0
		Development expenditure					104	100	152	191	236	236	250	250	312	378
			Foreign financed				72	81	124	133	209	209	216	216	208	233
			Domestically financed				32	20	28	58	27	27	35	35	104	145
		Net lending					0	0	1	0	2	2	4	4	4	5
Overall balance (including grants)							−16	−136	−185	−67	−194	−214	−190	−210	−134	−146
Discrepancy							−14	−2	−1	0	0	0	0	0	0	0
Overall balance (incl. grants and discrepancy)							−30	−138	−186	−67	−194	−214	−190	−210	−134	−146
Total financing (net)							30	138	186	67	194	201	190	190	135	146
	Foreign financing (net)						33	45	70	42	110	110	95	95	105	116
			Borrowing				38	54	82	74	132	132	121	121	131	148
					Budget support loans		0	14	0	18	0	0	0	0	0	0
					Project loans		38	40	61	57	121	121	121	121	131	148
					Other external loans4		0	0	20	0	12	12	0	0	0	0
			Amortization				−5	−9	−12	−32	−22	−22	−26	−26	−27	−32
	Issuance of promissory notes for securitizing domestic arrears								22	0	48	54	55	55	0	0
	Privatization proceeds						0	0	0	0	11	11	0	0	0	0
	Net domestic financing (NDF)						−2	93	94	25	25	25	40	40	30	30
	Financing gap						0	0	0	0	0	13	0	20	0	0
Memorandum items:
Primary balance (including grants and discrepancy)							3	−40	−71	42	−77.9	−97.5	−46	−66	−7	−37
Domestic fiscal balance5							−120	−126	−139	−61	−120.9	−140.5	−93	−113	−64	−71
Maturing promissory notes for domestic arrears							0	0	0	−--	−--	15.0	42	42	30	30
Nominal GDP							1,717	2,242	2,848	2,377	3,520.5	3,520.5	4,219	4,219	4,891	5,554

Sources: Malawi Ministry of Finance and IMF staff projections.

¹Data from the IMF Country Report No. 15/83.

²Nontax revenues in 2013/14 and 2014/15 include the RBM profit transfer to government of MK19.2 billion and MK25.4 billion, respectively.

³This includes promissory notes issued for the repayment of domestic arrears accumulated before FY2014/15.

⁴Other external loans in FY2014/15 include program loans from the World Bank for the financing of agriculture and education SWAPs and the National AIDS Commission (NAC).

⁵Domestic fiscal balance is calculated by subtracting current and domestically-financed development expenditures from domestic revenues.

View Table

Table 2a.

Malawi: Central Government Operations, 2012/13–2018/19

(Billions of Kwacha)

							2012/13	2013/14	2014/15	2015/16			2016/17		2017/18	2018/19
26-May-16							Actual	Actual	Actual	Prog.1	Revised Budget	Proj.	Prelim. budget	Proj.	Proj.
Revenue							472	511	610	774	792	792	905	905	1,062	1,209
		Tax and nontax revenue					297	441	530	648	655	655	784	784	920	1,046
			Tax Revenue				269	388	463	579	583	583	709	709	832	944
				Taxes on income and profits			129	181	233	289	304	304	393	393	455	517
				Taxes on goods and services			111	168	189	237	234	234	264	264	312	354
				Taxes on international trade			33	41	46	63	55	55	58	58	71	80
				Other taxes			−4	−2	−6	−10	−9	−9	−5	−5	−6	−7
			Nontax revenue 2				28	53	67	69	72	72	75	75	89	102
		Grants					176	70	79	126	137	137	122	122	141	163
			Budget support grants				78	7	0	7	21	21	0	0	0	0
			Project grants				35	41	48	76	68	68	73	73	77	85
			Dedicated grants				64	22	32	43	49	49	49	49	64	78
Expenditure and net lending							489	647	794	841	987	1,006	1,096	1,116	1,196	1,355
		Current expenditure					385	547	642	650	749	768	842	862	879	972
			Wages and salaries				97	140	197	193	222	222	261	261	313	360
			Interest payments				33	98	115	108	116	116	144	144	128	109
					Domestic		29	94	108	90	106	105	132	132	114	93
					Foreign		4	4	7	19	11	11	12	12	13	16
			Goods and services				144	176	158	184	190	203	211	231	254	294
					Generic goods and services		60	65	78	77	75	75	82	82	95	108
					Road Maintenance		7	8	9	11	21	21	21	21	30	36
					Agricultural SWAP			9	0	2	7	7	8	8	9	10
					Health SWAP		32	20	23	37	32	32	38	38	44	52
					Education SWAP		22	19	23	29	21	21	25	25	28	33
					National / local elections		1	11	1	1	1	1	2	2	2	2
					PFEM			3	1	1	4	4	4	4	4	4
					Statutory expenditures		6	7	8	3	6	6	5	5	6	6
					National AIDS Commission		5	9	3	5	8	8	13	13	15	16
					Maize purchases		3	14	5	6	9	22	5	25	12	13
					Rural Electrification Program		8	10	6	11	6	6	9	9	10	12
			Subsidies and other current transfers				98	125	139	165	172	172	166	166	184	209
					Pension and gratuities		16	20	31	30	43	43	50	50	58	66
					Transfers to road and revenue authorities		8	13	14	17	13	13	21	21	25	28
					Transfers to public entities and households		22	32	39	42	53	53	55	55	55	62
					Fertilizer and seed subsidy		52	60	55	75	64	64	40	40	46	53
						Of which: seed subsidy	6	9	4	…	9	9	10	10	11	13
			Arrears payments3				12	8	33	0	48	54	60	60	0	0
					of which: bonds for securitizing domestic arrears				22	0	48	54	55	55	0	0
		Development expenditure					104	100	152	191	236	236	250	250	312	378
			Foreign financed				72	81	124	133	209	209	216	216	208	233
			Domestically financed				32	20	28	58	27	27	35	35	104	145
		Net lending					0	0	1	0	2	2	4	4	4	5
Overall balance (including grants)							−16	−136	−185	−67	−194	−214	−190	−210	−134	−146
Discrepancy							−14	−2	−1	0	0	0	0	0	0	0
Overall balance (incl. grants and discrepancy)							−30	−138	−186	−67	−194	−214	−190	−210	−134	−146
Total financing (net)							30	138	186	67	194	201	190	190	135	146
	Foreign financing (net)						33	45	70	42	110	110	95	95	105	116
			Borrowing				38	54	82	74	132	132	121	121	131	148
					Budget support loans		0	14	0	18	0	0	0	0	0	0
					Project loans		38	40	61	57	121	121	121	121	131	148
					Other external loans4		0	0	20	0	12	12	0	0	0	0
			Amortization				−5	−9	−12	−32	−22	−22	−26	−26	−27	−32
	Issuance of promissory notes for securitizing domestic arrears								22	0	48	54	55	55	0	0
	Privatization proceeds						0	0	0	0	11	11	0	0	0	0
	Net domestic financing (NDF)						−2	93	94	25	25	25	40	40	30	30
	Financing gap						0	0	0	0	0	13	0	20	0	0
Memorandum items:
Primary balance (including grants and discrepancy)							3	−40	−71	42	−77.9	−97.5	−46	−66	−7	−37
Domestic fiscal balance5							−120	−126	−139	−61	−120.9	−140.5	−93	−113	−64	−71
Maturing promissory notes for domestic arrears							0	0	0	−--	−--	15.0	42	42	30	30
Nominal GDP							1,717	2,242	2,848	2,377	3,520.5	3,520.5	4,219	4,219	4,891	5,554

Sources: Malawi Ministry of Finance and IMF staff projections.

¹Data from the IMF Country Report No. 15/83.

²Nontax revenues in 2013/14 and 2014/15 include the RBM profit transfer to government of MK19.2 billion and MK25.4 billion, respectively.

³This includes promissory notes issued for the repayment of domestic arrears accumulated before FY2014/15.

⁴Other external loans in FY2014/15 include program loans from the World Bank for the financing of agriculture and education SWAPs and the National AIDS Commission (NAC).

⁵Domestic fiscal balance is calculated by subtracting current and domestically-financed development expenditures from domestic revenues.

Table 2b.

Malawi: Central Government Operations, 2012/13–2018/19

(Percent of GDP)

Sources: Malawi Ministry of Finance and IMF staff projections.

¹Data from the IMF Country Report No. 15/83.

²Nontax revenues in 2013/14 and 2014/15 include the RBM profit transfer to government of MK19.2 billion and MK25.4 billion, respectively.

³This includes promissory notes issued for the repayment of domestic arrears accumulated before FY2014/15.

⁴Other external loans in FY2014/15 includes program loans from the World Bank for the financing of agriculture and education SWAPS and the national AIDS Commission (NAC).

⁵Domestic fiscal balance is calculated by subtracting current and domestically-financed development expenditures from domestic revenues.

Table 2b.

Malawi: Central Government Operations, 2012/13–2018/19

(Percent of GDP)

						2012/13	2013/14	2014/15	2015/16			2016/17		2017/18	2018/19
26-May-16						Actual	Actual	Actual	Prog.1	Revised Budget	Proj.	Prelim. budget	Proj.	Proj.
Revenue						27.5	22.8	21.4	32.6	22.5	22.5	21.5	21.5	21.7	21.8
		Tax and nontax revenue				17.3	19.7	18.6	27.3	18.6	18.6	18.6	18.6	18.8	18.8
			Tax Revenue			15.7	17.3	16.3	24.4	16.6	16.6	16.8	16.8	17.0	17.0
				Taxes on income and profits		7.5	8.1	8.2	12.2	8.6	8.6	9.3	9.3	9.3	9.3
				Taxes on goods and services		6.4	7.5	6.6	10.0	6.6	6.6	6.3	6.3	6.4	6.4
				Taxes on international trade		1.9	1.8	1.6	2.7	1.6	1.6	1.4	1.4	1.4	1.4
				Other taxes		−0.2	−0.1	−0.2	−0.4	−0.3	−0.3	−0.1	−0.1	−0.1	−0.1
			Nontax revenue2			1.6	2.4	2.4	2.9	2.0	2.0	1.8	1.8	1.8	1.8
		Grants				10.2	3.1	2.8	5.3	3.9	3.9	2.9	2.9	2.9	2.9
			Budget support grants			4.5	0.3	0.0	0.3	0.6	0.6	0.0	0.0	0.0	0.0
			Project grants			2.0	1.8	1.7	3.2	1.9	1.9	1.7	1.7	1.6	1.5
			Dedicated grants			3.7	1.0	1.1	1.8	1.4	1.4	1.2	1.2	1.3	1.4
Expenditure and net lending						28.5	28.9	27.9	3 5.4	28.0	28.6	26.0	26.4	24.4	24.4
		Current expenditure				22.4	24.4	22.5	27.3	21.3	21.8	20.0	20.4	18.0	17.5
			Wages and salaries			5.7	6.2	6.9	8.1	6.3	6.3	6.2	6.2	6.4	6.5
			Interest payments			1.9	4.4	4.0	4.6	3.3	3.3	3.4	3.4	2.6	2.0
					Domestic	1.7	4.2	3.8	3.8	3.0	3.0	3.1	3.1	2.3	1.7
					Foreign	0.2	0.2	0.3	0.8	0.3	0.3	0.3	0.3	0.3	0.3
			Goods and services			8.4	7.9	5.5	7.7	5.4	5.8	5.0	5.5	5.2	5.3
					Generic goods and services	3.5	2.9	2.7	3.3	2.1	2.1	1.9	1.9	1.9	1.9
					Road Maintenance	0.4	0.4	0.3	0.5	0.6	0.6	0.5	0.5	0.6	0.6
					Agricultural swap	0.0	0.4	0.0	0.1	0.2	0.2	0.2	0.2	0.2	0.2
					Health SWAp	1.8	0.9	0.8	1.5	0.9	0.9	0.9	0.9	0.9	0.9
					Education SWAp	1.3	0.9	0.8	1.2	0.6	0.6	0.6	0.6	0.6	0.6
					National / local elections	0.0	0.5	0.0	0.1	0.0	0.0	0.0	0.0	0.0	0.0
					PFEM	0.0	0.1	0.0	0.0	0.1	0.1	0.1	0.1	0.1	0.1
					Statutory expenditures	0.3	0.3	0.3	0.1	0.2	0.2	0.1	0.1	0.1	0.1
					National AIDS Commission	0.3	0.4	0.1	0.2	0.2	0.2	0.3	0.3	0.3	0.3
					Maize purchases	0.2	0.6	0.2	0.3	0.2	0.6	0.1	0.6	0.2	0.2
					Rural Electrification Program	0.5	0.5	0.2	0.5	0.2	0.2	0.2	0.2	0.2	0.2
			Subsidies and other current transfers			5.7	5.6	4.9	6.9	4.9	4.9	3.9	3.9	3.8	3.8
					Pension and gratuities	0.9	0.9	1.1	1.3	1.2	1.2	1.2	1.2	1.2	1.2
					Transfers to road and revenue authorities	0.5	0.6	0.5	0.7	0.4	0.4	0.5	0.5	0.5	0.5
					Transfers to public entities	1.3	1.4	1.4	1.8	1.5	1.5	1.3	1.3	1.1	1.1
					Fertilizer and seed subsidy	3.0	2.7	1.9	3.2	1.8	1.8	0.9	0.9	0.9	0.9
					Of which: seed subsidy	0.3	0.4	0.1	…	0.3	0.3	0.2	0.2	0.2	0.2
			Arrears payments3			0.7	0.4	1.2	0.0	1.4	1.5	1.4	1.4	0.0	0.0
					of which: bonds for securitizing domestic arrears			0.8		1.4	1.5	1.3	1.3	0.0	0.0
		Development expenditure				6.1	4.5	5.3	8.0	6.7	6.7	5.9	5.9	6.4	6.8
			Foreign financed			4.2	3.6	4.4	5.6	5.9	5.9	5.1	5.1	4.3	4.2
			Domestically financed			1.8	0.9	1.0	2.5	0.8	0.8	0.8	0.8	2.1	2.6
		Net lending				0.0	0.0	0.0	0.0	0.0	0.0	0.1	0.1	0.1	0.1
Overall balance (including grants)						−0.9	−6.1	−6.5	−2.8	−5.5	−6.1	−4.5	−5.0	−2.7	−2.6
Discrepancy						−0.8	−0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Overall balance (including grants and discrepancy)						−1.7	−6.1	−6.5	−2.8	−5.5	−6.1	−4.5	−5.0	−2.7	−2.6
Total financing (net)						1.8	6.1	6.5	2.8	5.5	5.7	4.5	4.5	2.8	2.6
	Foreign financing (net)					1.9	2.0	2.5	1.8	3.1	3.1	2.3	2.3	2.1	2.1
			Borrowing			2.2	2.4	2.9	3.1	3.8	3.8	2.9	2.9	2.7	2.7
					Budget support loans	0.0	0.6	0.0	0.7	0.0	0.0	0.0	0.0	0.0	0.0
					Project loans	2.2	1.8	2.2	2.4	3.4	3.4	2.9	2.9	2.7	2.7
					Other external loans4	0.0	0.0	0.7	0.0	0.3	0.3	0.0	0.0	0.0	0.0
			Amortization			−0.3	−0.4	−0.4	−1.4	−0.6	−0.6	−0.6	−0.6	−0.5	−0.6
	Issuance of promissory notes for securitizing domestic arrears							0.8		1.4	1.5	1.3	1.3	0.0	0.0
	Privatization proceeds					0.0	0.0	0.0	0.0	0.3	0.3	0.0	0.0	0.0	0.0
	Net domestic financing (NDF)					−0.1	4.2	3.3	1.0	0.7	0.7	0.9	0.9	0.6	0.5
	Financing gap					0.0	0.0	0.0	0.0	0.0	0.4	0.0	0.5	0.0	0.0
Memorandum items:
Primary balance (including grants and discrepancy)						0.2	−1.8	−2.5	1.7	−2.2	−2.8	−1.1	−1.6	−0.1	−0.7
Domestic fiscal balance5						−7.0	−5.6	−4.9	−2.5	−3.4	−4.0	−2.2	−2.7	−1.3	−1.3
Maturing promissory notes for domestic arrears						0.0	0.0	0.0	−--	−--	0.4	1.0	1.0	0.6	0.5
Nominal GDP (fiscal year)						1,717	2,242	2,848	2,377	3,521	3,521	4,219	4,219	4,891	5,554

Sources: Malawi Ministry of Finance and IMF staff projections.

¹Data from the IMF Country Report No. 15/83.

²Nontax revenues in 2013/14 and 2014/15 include the RBM profit transfer to government of MK19.2 billion and MK25.4 billion, respectively.

³This includes promissory notes issued for the repayment of domestic arrears accumulated before FY2014/15.

⁴Other external loans in FY2014/15 includes program loans from the World Bank for the financing of agriculture and education SWAPS and the national AIDS Commission (NAC).

⁵Domestic fiscal balance is calculated by subtracting current and domestically-financed development expenditures from domestic revenues.

View Table

Table 2b.

Malawi: Central Government Operations, 2012/13–2018/19

(Percent of GDP)

						2012/13	2013/14	2014/15	2015/16			2016/17		2017/18	2018/19
26-May-16						Actual	Actual	Actual	Prog.1	Revised Budget	Proj.	Prelim. budget	Proj.	Proj.
Revenue						27.5	22.8	21.4	32.6	22.5	22.5	21.5	21.5	21.7	21.8
		Tax and nontax revenue				17.3	19.7	18.6	27.3	18.6	18.6	18.6	18.6	18.8	18.8
			Tax Revenue			15.7	17.3	16.3	24.4	16.6	16.6	16.8	16.8	17.0	17.0
				Taxes on income and profits		7.5	8.1	8.2	12.2	8.6	8.6	9.3	9.3	9.3	9.3
				Taxes on goods and services		6.4	7.5	6.6	10.0	6.6	6.6	6.3	6.3	6.4	6.4
				Taxes on international trade		1.9	1.8	1.6	2.7	1.6	1.6	1.4	1.4	1.4	1.4
				Other taxes		−0.2	−0.1	−0.2	−0.4	−0.3	−0.3	−0.1	−0.1	−0.1	−0.1
			Nontax revenue2			1.6	2.4	2.4	2.9	2.0	2.0	1.8	1.8	1.8	1.8
		Grants				10.2	3.1	2.8	5.3	3.9	3.9	2.9	2.9	2.9	2.9
			Budget support grants			4.5	0.3	0.0	0.3	0.6	0.6	0.0	0.0	0.0	0.0
			Project grants			2.0	1.8	1.7	3.2	1.9	1.9	1.7	1.7	1.6	1.5
			Dedicated grants			3.7	1.0	1.1	1.8	1.4	1.4	1.2	1.2	1.3	1.4
Expenditure and net lending						28.5	28.9	27.9	3 5.4	28.0	28.6	26.0	26.4	24.4	24.4
		Current expenditure				22.4	24.4	22.5	27.3	21.3	21.8	20.0	20.4	18.0	17.5
			Wages and salaries			5.7	6.2	6.9	8.1	6.3	6.3	6.2	6.2	6.4	6.5
			Interest payments			1.9	4.4	4.0	4.6	3.3	3.3	3.4	3.4	2.6	2.0
					Domestic	1.7	4.2	3.8	3.8	3.0	3.0	3.1	3.1	2.3	1.7
					Foreign	0.2	0.2	0.3	0.8	0.3	0.3	0.3	0.3	0.3	0.3
			Goods and services			8.4	7.9	5.5	7.7	5.4	5.8	5.0	5.5	5.2	5.3
					Generic goods and services	3.5	2.9	2.7	3.3	2.1	2.1	1.9	1.9	1.9	1.9
					Road Maintenance	0.4	0.4	0.3	0.5	0.6	0.6	0.5	0.5	0.6	0.6
					Agricultural swap	0.0	0.4	0.0	0.1	0.2	0.2	0.2	0.2	0.2	0.2
					Health SWAp	1.8	0.9	0.8	1.5	0.9	0.9	0.9	0.9	0.9	0.9
					Education SWAp	1.3	0.9	0.8	1.2	0.6	0.6	0.6	0.6	0.6	0.6
					National / local elections	0.0	0.5	0.0	0.1	0.0	0.0	0.0	0.0	0.0	0.0
					PFEM	0.0	0.1	0.0	0.0	0.1	0.1	0.1	0.1	0.1	0.1
					Statutory expenditures	0.3	0.3	0.3	0.1	0.2	0.2	0.1	0.1	0.1	0.1
					National AIDS Commission	0.3	0.4	0.1	0.2	0.2	0.2	0.3	0.3	0.3	0.3
					Maize purchases	0.2	0.6	0.2	0.3	0.2	0.6	0.1	0.6	0.2	0.2
					Rural Electrification Program	0.5	0.5	0.2	0.5	0.2	0.2	0.2	0.2	0.2	0.2
			Subsidies and other current transfers			5.7	5.6	4.9	6.9	4.9	4.9	3.9	3.9	3.8	3.8
					Pension and gratuities	0.9	0.9	1.1	1.3	1.2	1.2	1.2	1.2	1.2	1.2
					Transfers to road and revenue authorities	0.5	0.6	0.5	0.7	0.4	0.4	0.5	0.5	0.5	0.5
					Transfers to public entities	1.3	1.4	1.4	1.8	1.5	1.5	1.3	1.3	1.1	1.1
					Fertilizer and seed subsidy	3.0	2.7	1.9	3.2	1.8	1.8	0.9	0.9	0.9	0.9
					Of which: seed subsidy	0.3	0.4	0.1	…	0.3	0.3	0.2	0.2	0.2	0.2
			Arrears payments3			0.7	0.4	1.2	0.0	1.4	1.5	1.4	1.4	0.0	0.0
					of which: bonds for securitizing domestic arrears			0.8		1.4	1.5	1.3	1.3	0.0	0.0
		Development expenditure				6.1	4.5	5.3	8.0	6.7	6.7	5.9	5.9	6.4	6.8
			Foreign financed			4.2	3.6	4.4	5.6	5.9	5.9	5.1	5.1	4.3	4.2
			Domestically financed			1.8	0.9	1.0	2.5	0.8	0.8	0.8	0.8	2.1	2.6
		Net lending				0.0	0.0	0.0	0.0	0.0	0.0	0.1	0.1	0.1	0.1
Overall balance (including grants)						−0.9	−6.1	−6.5	−2.8	−5.5	−6.1	−4.5	−5.0	−2.7	−2.6
Discrepancy						−0.8	−0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Overall balance (including grants and discrepancy)						−1.7	−6.1	−6.5	−2.8	−5.5	−6.1	−4.5	−5.0	−2.7	−2.6
Total financing (net)						1.8	6.1	6.5	2.8	5.5	5.7	4.5	4.5	2.8	2.6
	Foreign financing (net)					1.9	2.0	2.5	1.8	3.1	3.1	2.3	2.3	2.1	2.1
			Borrowing			2.2	2.4	2.9	3.1	3.8	3.8	2.9	2.9	2.7	2.7
					Budget support loans	0.0	0.6	0.0	0.7	0.0	0.0	0.0	0.0	0.0	0.0
					Project loans	2.2	1.8	2.2	2.4	3.4	3.4	2.9	2.9	2.7	2.7
					Other external loans4	0.0	0.0	0.7	0.0	0.3	0.3	0.0	0.0	0.0	0.0
			Amortization			−0.3	−0.4	−0.4	−1.4	−0.6	−0.6	−0.6	−0.6	−0.5	−0.6
	Issuance of promissory notes for securitizing domestic arrears							0.8		1.4	1.5	1.3	1.3	0.0	0.0
	Privatization proceeds					0.0	0.0	0.0	0.0	0.3	0.3	0.0	0.0	0.0	0.0
	Net domestic financing (NDF)					−0.1	4.2	3.3	1.0	0.7	0.7	0.9	0.9	0.6	0.5
	Financing gap					0.0	0.0	0.0	0.0	0.0	0.4	0.0	0.5	0.0	0.0
Memorandum items:
Primary balance (including grants and discrepancy)						0.2	−1.8	−2.5	1.7	−2.2	−2.8	−1.1	−1.6	−0.1	−0.7
Domestic fiscal balance5						−7.0	−5.6	−4.9	−2.5	−3.4	−4.0	−2.2	−2.7	−1.3	−1.3
Maturing promissory notes for domestic arrears						0.0	0.0	0.0	−--	−--	0.4	1.0	1.0	0.6	0.5
Nominal GDP (fiscal year)						1,717	2,242	2,848	2,377	3,521	3,521	4,219	4,219	4,891	5,554

Sources: Malawi Ministry of Finance and IMF staff projections.

¹Data from the IMF Country Report No. 15/83.

²Nontax revenues in 2013/14 and 2014/15 include the RBM profit transfer to government of MK19.2 billion and MK25.4 billion, respectively.

³This includes promissory notes issued for the repayment of domestic arrears accumulated before FY2014/15.

⁴Other external loans in FY2014/15 includes program loans from the World Bank for the financing of agriculture and education SWAPS and the national AIDS Commission (NAC).

⁵Domestic fiscal balance is calculated by subtracting current and domestically-financed development expenditures from domestic revenues.