Front Matter Page
IMF Country Report No. 20/168
MALAWI
REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MALAWI
May 2020
In the context of the Request for Disbursement Under the Rapid Credit Facility, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 1, following discussions that ended on April 17, with the officials of Malawi on economic developments and policies underpinning the IMF arrangement under the Rapid Credit Facility. Based on information available at the time of these discussions, the staff report was completed on April 27, 2020.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).
A Statement by the Executive Director for Malawi.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of Malawi*
*Also included in the Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623–7430 • Fax: (202) 623–7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
© 2020 International Monetary Fund
Front Matter Page
MALAWI
REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY
April 27, 2020
Executive Summary
Context. The COVID-19 pandemic is having a severe impact on Malawi’s economy. Spillovers from the global slowdown, border closures, and economic disruption in neighboring countries have reduced exports, raised trade transit costs, and weighed on remittances, tourism, and foreign direct investment; and a country-wide lockdown—to curb growing cases and deaths from COVID-19—has slowed domestic activity. Malawi’s public health system is poorly equipped to manage this major public health emergency.
Program Status. The 2nd and 3rd reviews under the ECF arrangement and request for augmentation (20 percent of quota) were approved by the Executive Board in November 2019. Discussions on the 4 th review under the ECF arrangement will be continued when there is greater clarity on the outlook, which is clouded by the evolving nature of the pandemic. Preliminary data suggest that all quantitative performance criteria for the end-December 2019 test date were observed.
Request. Malawi is experiencing an urgent balance of payments need arising from the COVID-19 pandemic, with an external financing gap—estimated at 2.1 percent of GDP ($176 million)—that would result in an immediate and severe economic disruption. In the attached letter of intent (LOI), the authorities are seeking financial assistance under the “exogenous shocks” window of the Rapid Credit Facility (RCF), requesting a disbursement of SDR 66.44 million (equiva lent to 47.9 percent of quota or $93 million). Malawi received SDR 7.202 million under the CCRT on April 13. Staff supports the authorities’ request—expected to play a catalytic role in securing additional financing from Malawi’s development partners, which the authorities are actively seeking.
Macroeconomic policies. To cope with the impact of the COVID-19 pandemic on Malawi, the authorities are increasing spending on health care and social assistance, especially for the most vulnerable; supporting farmers’ incomes and ensuring food security through purchase and storage of agricultural harvests; enhancing financial sector monitoring and injecting liquidity as needed to maintain a smoothly functioning banking system; implementing an emergency liquidity assistance framework; taking measures to support small and medium enterprises; and are committed to greater exchange rate flexibility to buffer this external shock. The authorities also continue to prioritize policies to achieve higher and more broad-based medium-term growth and governance reforms while preserving macroeconomic stability and debt sustainability.
Approved By
David Robinson (AFR) and S. Ali Abbas (SPR)
A staff team comprised of Ms. Mitra (head), Ms. Far ahbak s h, Ms. Gwenhamo, Ms. Yoon (all AFR), Mr. Lee (SPR), Mr. Swistak (FAD), Mr. Banda (local economist), and Mr. Anderson (FAD long-term expert) exchanged information and held discussions with the Hon. Joseph Mwanamvekha (Minister of Finance), Dr. Dalitso Kabambe (Governor of the Reserve Bank of Malawi), and other senior officials by videoconference on April 15–17, 2020. Mr. Sitima-wina (OED) joined in the discussions. Ms. Fabo and Ms. Kumar assisted in the preparation of the staff report.
Contents
CONTEXT
PRE-COVID-19 ECONOMIC DEVELOPMENTS
IMPACT OF THE COVID-19 PANDEMIC
POLICY ISSUES
MODALITIES OF FUND SUPPORT UNDER THE RAPID CREDIT FACILITY
STAFF APPRAISAL
TABLES
1. Selected Economic Indicators, 2018–25
2a. Central Government Operations, 2018/2019–2024/2025 (Billions of Kwacha)
2b. Central Government Operations, 2018/2019–2024/2025 (Percent of GDP)
3a. Monetary Authorities’ Balance Sheet, 2018–20 (Billions of Kwacha)
3b. Monetary Survey, 2018–20 (Billions of Kwacha)
4a. Balance of Payments, 2018–25 (Millions of USD)
4b. Balance of Payments, 2018–25 (Percent of GDP)
5. Selected Banking Soundness Indicators, 2015–20
6. External Financing Requirement and Source, 2018–25
7. Indicators of Capacity to Repay the Fund, 2020–33
8. Structural Benchmarks Under ECF Arrangement, 2019–20
APPENDIX
I. Letter of Intent
Front Matter Page
MALAWI
REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—DEBT SUSTAINABILITY ANALYSIS1
April 27, 2020
Approved By
David Robinson and S. Ali Abbas (IMF) and Marcello Estevão (IDA)
Prepared by the staffs of International Monetary Fund and the International Development Association (IDA)
Front Matter Page
700 19th Street NW
Washington, DC 20431
USA
