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MALAWI

REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND REQUEST FOR A STAFF MONITORED PROGRAM WITH EXECUTIVE BOARD INVOLVEMENT—INFORMATIONAL ANNEX

November 14, 2022

Prepared By

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• FUND RELATIONS

• JOINT MANAGERIAL ACTION PLAN

• RELATIONS WITH THE AFRICAN DEVELOPMENT BANK

• STATISTICAL ISSUES

Fund Relations

(As of October 31, 2022)

Membership Status

Joined: July 19, 1965; Article VIII

General Resources Account:
	SDR Million	%Quota
Quota	138.80	100.00
Fund holdings of currency (exchange rate)	136.36	98.24
Reserve tranche position	2.44	1.76
SDR Department:
	SDR Million	%Allocation
Net cumulative allocation	199.40	100.00
Holdings	9.75	4.89
Outstanding Purchases and Loans:
	SDR Million	%Quota
RCF Loans	138.75	99.96
ECF Arrangements	129.74	93.47

View Table

General Resources Account:
	SDR Million	%Quota
Quota	138.80	100.00
Fund holdings of currency (exchange rate)	136.36	98.24
Reserve tranche position	2.44	1.76
SDR Department:
	SDR Million	%Allocation
Net cumulative allocation	199.40	100.00
Holdings	9.75	4.89
Outstanding Purchases and Loans:
	SDR Million	%Quota
RCF Loans	138.75	99.96
ECF Arrangements	129.74	93.47

Latest Financial Commitments:

Arrangements:

Type	Date of Arrangement	Expiration Date	Amount Approved (SDR Million)	Amount Drawn (SDR Million)
ECF	04/30/2018	09/24/20201	105.84	53.85
ECF	07/23/2012	06/29/2017	138.80	138.80
ECF	02/19/2010	07/22/2012	52.05	13.88

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Type	Date of Arrangement	Expiration Date	Amount Approved (SDR Million)	Amount Drawn (SDR Million)
ECF	04/30/2018	09/24/20201	105.84	53.85
ECF	07/23/2012	06/29/2017	138.80	138.80
ECF	02/19/2010	07/22/2012	52.05	13.88

Outright Loans:

Type	Date of Arrangement	Expiration Date	Amount Approved (SDR Million)	Amount Drawn (SDR Million)
RCF	10/02/2020	10/06/2020	72.31	72.31
RCF	05/01/2020	05/05/2020	66.44	66.44

View Table

Type	Date of Arrangement	Expiration Date	Amount Approved (SDR Million)	Amount Drawn (SDR Million)
RCF	10/02/2020	10/06/2020	72.31	72.31
RCF	05/01/2020	05/05/2020	66.44	66.44

Overdue Obligations and Projected Payments to Fund1

(SDR Million; based on existing use of resources and present holdings of SDRs):

	2022	2023	2024	2025	2026
Principal	8.67	22.37	23.11	33.46	47.84
Charges/Interest	0.91	4.71	4.71	4.71	4.71
Total	9.58	27.08	27.82	38.17	52.55

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	2022	2023	2024	2025	2026
Principal	8.67	22.37	23.11	33.46	47.84
Charges/Interest	0.91	4.71	4.71	4.71	4.71
Total	9.58	27.08	27.82	38.17	52.55

¹Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

²Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Implementation of HIPC Initiative:
	Enhanced Framework
Commitment of HIPC assistance
Decision point date	December 2000
Assistance committed
by all creditors (US$ Million)1	1,057.00
Of which: IMF assistance (US$ million)	45.27
(SDR equivalent in millions)	33.37
Completion point date	Aug 2006
Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member	33.37
Interim assistance	11.57
Completion point balance	21.80
Additional disbursement of interest income2	3.82
Total disbursements	37.19

¹Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

²Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

View Table

Implementation of HIPC Initiative:
	Enhanced Framework
Commitment of HIPC assistance
Decision point date	December 2000
Assistance committed
by all creditors (US$ Million)1	1,057.00
Of which: IMF assistance (US$ million)	45.27
(SDR equivalent in millions)	33.37
Completion point date	Aug 2006
Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member	33.37
Interim assistance	11.57
Completion point balance	21.80
Additional disbursement of interest income2	3.82
Total disbursements	37.19

¹Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

²Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Implementation of Multilateral Debt Relief Initiative (MDRI):

¹The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

MDRI-eligible debt (SDR Million)1			37.87
Financed by: MDRI Trust			14.53
Remaining HIPC resources			23.34
Debt Relief by Facility (SDR Million)
	Eligible Debt
Delivery Date	GRA	PRGF	Total
December 2006	N/A	7.91	7.91
September 2006	10.84	19.12	29.96

¹The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

View Table

MDRI-eligible debt (SDR Million)1			37.87
Financed by: MDRI Trust			14.53
Remaining HIPC resources			23.34
Debt Relief by Facility (SDR Million)
	Eligible Debt
Delivery Date	GRA	PRGF	Total
December 2006	N/A	7.91	7.91
September 2006	10.84	19.12	29.96

¹The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

¹As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.

Implementation of Catastrophe Containment and Relief (CCR)1:
Date of Catastrophe	Board Decision Date	Amount Committed	Amount Disbursed
		(SDR million)	(SDR million)
N/A	04/13/2020	7.20	7.20
N/A	10/02/2020	7.20	7.20
N/A	04/01/2021	7.81	7.81
N/A	10/06/2021	6.72	6.72
N/A	12/15/2021	3.91	3.91

¹As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.

View Table

Implementation of Catastrophe Containment and Relief (CCR)1:
Date of Catastrophe	Board Decision Date	Amount Committed	Amount Disbursed
		(SDR million)	(SDR million)
N/A	04/13/2020	7.20	7.20
N/A	10/02/2020	7.20	7.20
N/A	04/01/2021	7.81	7.81
N/A	10/06/2021	6.72	6.72
N/A	12/15/2021	3.91	3.91

¹As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.

Safeguards Assessments:

The 2021 safeguards assessment of the RBM is substantially completed. It found significant deterioration of safeguards at the RBM since the 2018 assessment. Governance arrangements and the internal control environment are considered weak. Governance reform should establish the Board as the RBM’s main decision-making body responsible for oversight and policy formulation, and to introduce collegiality in executive management. Amendments of the central bank legal framework are needed to safeguard the central bank’s autonomy and enhance collegiality in executive management. The RBM will also need to strengthen management of foreign reserves.

Exchange Arrangements:

In May 2012, the government liberalized the foreign exchange regime, devalued the kwacha by about 33 percent, and adopted a de jure floating exchange rate regime. Since May 2012, the RBM has not set a target rate and allowed substantial volatility in the exchange rate. However, the U.S. dollar exchange rates have shown remarkable stability since October 2016. Accordingly, the de facto exchange rate arrangement is classified as “stabilized". Inflows of foreign exchange and swap arrangements have allowed for increase in international reserves until 2020. The exchange regime is free of restrictions and multiple currency practices. The RBM reintroduced in August 2021 a surrender requirement to address foreign exchange shortages which is treated as a temporary measure to address extraordinary circumstances and should be lifted as conditions improve. In May 2022, kwacha was devalued by 25 percent to correct for a large real exchange rate overvaluation for the first time since 2012.

Article IV Consultation:

The Executive Board concluded the last Article IV consultation with Malawi on December 13, 2021.

Financial Sector Assessment Program (FSAP), Reports on Observance of Standards and Codes (ROSCs), and Offshore Financial Center (OFC) Assessments:

A joint team of the World Bank and the International Monetary Fund visited Malawi under the FSAP program during two missions in July and December 2007. The Financial System Stability Assessment (FSSA) was issued in June 2008 (SM/08/198). An FSAP development module was conducted in mid-2017.

Corporate Governance and Accounting and Auditing ROSC missions visited Malawi in February and June 2007.

An update on the FAD mission on the fiscal transparency module was issued in March 2007. A ROSC on the data module, based on a September 2003 mission, was published in October 2004.

Capacity Development: (since 2020, as of October 20, 2022)

Date of Delivery	Department	Ministry/Agency	Purpose/Topic	Modality
10/22	STA	MOF	Strengthen the quality of GFS/PSDS	Virtual Mission
09/22	FAD	MRA	Strengthen the management of MRA’s tax arrear’s function and improve debt management capacity	Mission
08/22	MCM	RBM	Enhance the RBM’s understanding of systematic risk in domestic systematically important banks	Mission
08/22	FAD	MRA	Review the deployment of new Information Tax Administration System (ITAS)	Virtual Mission
07/22	FAD	MRA	Review the Revenue Mobilization Thematic Fund (RMTF) project	Mission
07/22	FAD	MRA	Review MRA’s proposed organizational design for the Domestic Tax Division	Virtual Mission
06/22	FAD	MRA	Assess the effectiveness of the tax audit program	Virtual Mission
05/22	AFE	MOF	Strengthen project appraisal and selection techniques	Mission
05/22	FAD	MRA	Tax Administration Diagnostic Assessment Tool training workshop	Virtual Mission
05/22	AFE	MOF	Strengthen the credibility and reliability of the Public Sector Investment Plan document	Mission
04/22	AFE	MRA	Strengthen MRA’s investigations capacity and customs administration	Workshop
04/22	AFE	NSO	Designing new IIP and PPI bulletin	Virtual Mission
04/22	MCM	RBM	Basel III framework with a focus on credit, operational and liquidity risk	Virtual Mission
04/22	STA	MOF	Improve the quality of fiscal data for the consolidated general government	Virtual Mission
04/22	STA	NSO	Improve the quality and timeliness of external sector statistics	Virtual Mission
03/22	AFE	RBM	Review the key components of FPAS	Virtual Mission
02/22	FAD	MRA	Strengthen revenue administration	Virtual Mission
11/21	AFE	MOF	Strengthen SOE analysis	Virtual Mission
11/21	FAD	MOF	Supporting implementation of a new ITAS	Virtual Mission
11/21	AFE	MOF	Improving quality of general government fiscal data	Virtual Mission
11/21	AFE	NSO	Compilation of GDP expenditure and production	Virtual Mission
09/21	AFE	NSO	Finalize new weights and update the CPI basket	Virtual Mission
09/21	STA	MOF	Using tax data for GDP compilation	Virtual Mission
09/21	FAD	MOF	Developing a VAT compliance improvement plan	Virtual Mission
09/21	FAD	MOF	Integrating performance budgeting and IT systems	Virtual Mission
09/21	FAD	MOF	Excise management	Virtual Mission
08/21	AFE	MOF	Strengthening project appraisal and selection	Virtual Mission
07/21	AFE	NSO	Continued compilation of GDP expenditure	Virtual Mission
07/21	FAD	MOF	Audit of high risk sectors for VAT	Virtual Mission
06/21	AFE	NSO	CPI Update	Virtual Mission
05/21	MCM	RBM	Principles for financial market infrastructures training	Workshop
05/21	MCM	RBM	Review of oversight framework	Workshop
04/21	STA	RBM	Monetary and financial statistics	Virtual Mission
04/21	FAD	MOF	Strengthen excise management	Virtual Mission
03/21	STA	RBM	External sector statistics	Virtual Mission
12/20	AFE	NSO	National accounts: Review and assist to compile GDP by production	Virtual Mission
09/20	FAD	MOF	Develop a revenue action plan to mitigate the impact of COVID-19	Virtual Mission
08/20	FAD	MOF	Fiscal risks during COVID-19	Virtual Mission
07/20	AFE	NSO	COVID-19 Prices: Compiling PPI and IIP weights	Virtual Mission
07/20	AFE	NSO	COVID-19 National Accounts: Compilation of the supply table	Virtual Mission
06/20	FAD	MOF	Fiscal reporting: Completing the cash basis IPSAS implementation	Virtual Mission
06/20	FAD	MOF	Implementing Msonkho online	Virtual Mission
02/20	FAD	MOF	Public sector balance sheet	Mission
02/20	FAD	MOF	Developing a revenue mobilization strategy	Mission
01/20	MCM	RBM	Projection of the Central Bank balance sheet	Mission

View Table

Date of Delivery	Department	Ministry/Agency	Purpose/Topic	Modality
10/22	STA	MOF	Strengthen the quality of GFS/PSDS	Virtual Mission
09/22	FAD	MRA	Strengthen the management of MRA’s tax arrear’s function and improve debt management capacity	Mission
08/22	MCM	RBM	Enhance the RBM’s understanding of systematic risk in domestic systematically important banks	Mission
08/22	FAD	MRA	Review the deployment of new Information Tax Administration System (ITAS)	Virtual Mission
07/22	FAD	MRA	Review the Revenue Mobilization Thematic Fund (RMTF) project	Mission
07/22	FAD	MRA	Review MRA’s proposed organizational design for the Domestic Tax Division	Virtual Mission
06/22	FAD	MRA	Assess the effectiveness of the tax audit program	Virtual Mission
05/22	AFE	MOF	Strengthen project appraisal and selection techniques	Mission
05/22	FAD	MRA	Tax Administration Diagnostic Assessment Tool training workshop	Virtual Mission
05/22	AFE	MOF	Strengthen the credibility and reliability of the Public Sector Investment Plan document	Mission
04/22	AFE	MRA	Strengthen MRA’s investigations capacity and customs administration	Workshop
04/22	AFE	NSO	Designing new IIP and PPI bulletin	Virtual Mission
04/22	MCM	RBM	Basel III framework with a focus on credit, operational and liquidity risk	Virtual Mission
04/22	STA	MOF	Improve the quality of fiscal data for the consolidated general government	Virtual Mission
04/22	STA	NSO	Improve the quality and timeliness of external sector statistics	Virtual Mission
03/22	AFE	RBM	Review the key components of FPAS	Virtual Mission
02/22	FAD	MRA	Strengthen revenue administration	Virtual Mission
11/21	AFE	MOF	Strengthen SOE analysis	Virtual Mission
11/21	FAD	MOF	Supporting implementation of a new ITAS	Virtual Mission
11/21	AFE	MOF	Improving quality of general government fiscal data	Virtual Mission
11/21	AFE	NSO	Compilation of GDP expenditure and production	Virtual Mission
09/21	AFE	NSO	Finalize new weights and update the CPI basket	Virtual Mission
09/21	STA	MOF	Using tax data for GDP compilation	Virtual Mission
09/21	FAD	MOF	Developing a VAT compliance improvement plan	Virtual Mission
09/21	FAD	MOF	Integrating performance budgeting and IT systems	Virtual Mission
09/21	FAD	MOF	Excise management	Virtual Mission
08/21	AFE	MOF	Strengthening project appraisal and selection	Virtual Mission
07/21	AFE	NSO	Continued compilation of GDP expenditure	Virtual Mission
07/21	FAD	MOF	Audit of high risk sectors for VAT	Virtual Mission
06/21	AFE	NSO	CPI Update	Virtual Mission
05/21	MCM	RBM	Principles for financial market infrastructures training	Workshop
05/21	MCM	RBM	Review of oversight framework	Workshop
04/21	STA	RBM	Monetary and financial statistics	Virtual Mission
04/21	FAD	MOF	Strengthen excise management	Virtual Mission
03/21	STA	RBM	External sector statistics	Virtual Mission
12/20	AFE	NSO	National accounts: Review and assist to compile GDP by production	Virtual Mission
09/20	FAD	MOF	Develop a revenue action plan to mitigate the impact of COVID-19	Virtual Mission
08/20	FAD	MOF	Fiscal risks during COVID-19	Virtual Mission
07/20	AFE	NSO	COVID-19 Prices: Compiling PPI and IIP weights	Virtual Mission
07/20	AFE	NSO	COVID-19 National Accounts: Compilation of the supply table	Virtual Mission
06/20	FAD	MOF	Fiscal reporting: Completing the cash basis IPSAS implementation	Virtual Mission
06/20	FAD	MOF	Implementing Msonkho online	Virtual Mission
02/20	FAD	MOF	Public sector balance sheet	Mission
02/20	FAD	MOF	Developing a revenue mobilization strategy	Mission
01/20	MCM	RBM	Projection of the Central Bank balance sheet	Mission

Joint Managerial Action Plan

(As of October 20, 2022)

Title	Products	Expected Delivery Date
A. Mutual Information on Relevant Work Programs
World Bank work program in the next 12 months	FY23 Analytical and Advisory Activities: 1. Malawi: Overcoming Challenges to Transform Human Capital 2. Country Climate and Development Report 3. Malawi Poverty Assessment 4. Malawi Economic Monitor 5. Malawi: Overcoming Challenges to Transform Human Capital 6. Integrated Water Resources Management 7. Malawi Transport InfraSAP2.0 8. Malawi Country Economic Memorandum 9. Malawi: Energy Sector Financial Strengthening 10. Malawi: Out of School Children 11. Malawi: Human Resourcing in Health 12. Malawi: A Deep-Dive Study for Promoting Resilient Urban Development and Driving Sustainable Regional Growth 1. FY23 Lending 2. Malawi Growth and Resilience Development Policy Financing – Series 1 3. Regional Statistics Capacity Building Project 4. Agriculture Commercialization Project 2.0 5. Emergency Protecting Basic Services Project 6. Additional Financing Social Support for Resilient Livelihoods Project 7. Urban Water Series of Operations	November, 2022 October, 2022 November, 2022 Twice a year November, 2023 June, 2023 December, 2023 June, 2023 June, 2023 June 28, 2022 July 29, 2023 December, 2023 [FY23 tbc] [FY23 tbc] May, 2023 December 20, 2022 December 20, 2022 September, 2023
B. Requests for Work Program Inputs
IMF request to World Bank	1. Updates on WB support to Malawi	Continuous
World Bank request to IMF	1. Regular updates and exchange of views on medium-term macroeconomic and fiscal projections including sharing detailed excel tables on Real, Monetary, Fiscal and External Sectors	Continuous
C. Agreement on Joint Products and Missions
Joint products in next 12 months	1. Debt Sustainability Analysis (update)	December, 2021

View Table

Title	Products	Expected Delivery Date
A. Mutual Information on Relevant Work Programs
World Bank work program in the next 12 months	FY23 Analytical and Advisory Activities: 1. Malawi: Overcoming Challenges to Transform Human Capital 2. Country Climate and Development Report 3. Malawi Poverty Assessment 4. Malawi Economic Monitor 5. Malawi: Overcoming Challenges to Transform Human Capital 6. Integrated Water Resources Management 7. Malawi Transport InfraSAP2.0 8. Malawi Country Economic Memorandum 9. Malawi: Energy Sector Financial Strengthening 10. Malawi: Out of School Children 11. Malawi: Human Resourcing in Health 12. Malawi: A Deep-Dive Study for Promoting Resilient Urban Development and Driving Sustainable Regional Growth 1. FY23 Lending 2. Malawi Growth and Resilience Development Policy Financing – Series 1 3. Regional Statistics Capacity Building Project 4. Agriculture Commercialization Project 2.0 5. Emergency Protecting Basic Services Project 6. Additional Financing Social Support for Resilient Livelihoods Project 7. Urban Water Series of Operations	November, 2022 October, 2022 November, 2022 Twice a year November, 2023 June, 2023 December, 2023 June, 2023 June, 2023 June 28, 2022 July 29, 2023 December, 2023 [FY23 tbc] [FY23 tbc] May, 2023 December 20, 2022 December 20, 2022 September, 2023
B. Requests for Work Program Inputs
IMF request to World Bank	1. Updates on WB support to Malawi	Continuous
World Bank request to IMF	1. Regular updates and exchange of views on medium-term macroeconomic and fiscal projections including sharing detailed excel tables on Real, Monetary, Fiscal and External Sectors	Continuous
C. Agreement on Joint Products and Missions
Joint products in next 12 months	1. Debt Sustainability Analysis (update)	December, 2021

Relations with the African Development Bank

(As of November 2022)

The African Development Bank (AfDB) operations in Malawi date back to 1969. The AfDB Group Malawi Country Office was opened in 2007. As of September 30, 2021, the AfDB had provided significant and diversified support to Malawi, with cumulative commitments worth UA 1,010.2 billion (about US$1.4 billion) to finance 116 operations, including thirteen studies and two lines of credit.

The AfDB’ s Malawi Country Strategy Paper (CSP) covering the period 2018-2022 is fully aligned with the third Malawi Growth and Development Strategy (MGDS III, 2017-22), Malawi Vision 2063, and the AfDB’s corporate priorities in the Long-Term Strategy (LTS, 2013–22) and High 5 priorities.

The current CSP 2018-2022, aims to support the foundations of private sector led growth by investing in infrastructure and promoting diversification and transformation agenda. In this regard, the CSP covers two pillars. Pillar I: Investing in infrastructure development through energy and transport; and Pillar II: Investing in economic transformation by strengthening agriculture value addition and developing water infrastructure.

The strategic objective of pillar 1 is to improve competitiveness and efficiency of private and public sector, by extending infrastructure, limiting bottlenecks, and reducing investment constraints that increase business transaction costs. The outcomes to this pillar include improved connectivity to local and regional markets, reduced transport costs, and increased private sector investment in energy and transport. Similarly, the strategic objective of pillar 2 is to boost economic diversification and build resilience by reducing cost of market entry, underpinning the creation of firms and jobs that contribute to the broadening the tax base and enhancing macro-stability. The outcomes for pillar 2 include increased productivity and production, increased market development and diversification, empowered local communities and improved health and wellness.

Crosscutting themes are mainstreamed into the CSP and are an integral part of lending and non-lending operations. Environment and climate change, skills, and training especially amongst the youth, and economic and financial governance are the central cross-cutting areas in operations selected for support.

The CSP (2018-2022) was financed from ADF 14 and ADF-15 resources, with an indicative financing envelop of USD 391.3 million. The Bank approved twelve projects exceeding the ten initially planned. The approved projects are in line with the CSP priorities and covered diverse sectors: transport, agriculture, water, and sanitation as well as cross-cutting areas of economic governance and skills development. About 62% (UA 97.6 million) of the approved resources were secured from the African Development Fund; while the remaining balance came from Nigerian Trust Fund, Global Environmental Facility and Special Relief Fund. The recently approved projects include Africa Disaster Risk Financing Programme (USD 4.7 million) in June 2022 and Malawi Emergency Food Production (USD 20 million. In 2021, the Bank approved the Technical Assistance for the Catchment Based Climate Resilient Water Security Project (USD 865 thousand) in June and Support for Digitization, Financial Inclusion and Competitiveness in December.

Through a strong partnership with the EU, the AfDB has managed to secure 18 million Euros (grant) on 25th February 2019 to co-finance the Multinational Nacala Road Corridor Development Project Phase V. In support of the Nkhata Bay Town Water Supply and Sanitation Project, the AfDB is administering OPEC Fund for International Development (OFID) USD 12 million loan.

Three were approved during 2021-2022 period and are under implementation: (i) Digitalization, Financial Inclusion and Competitiveness Project for USD 13.7 million – 8 December 2021, (ii) Africa Disaster Risk Financing (ADRiFi) worth USD 4.9 million – 2 June 2022, and (iii) Rehabilitating and Upgrading of M5 Road (North-South Road Corridor Project – Benga-Nkhotakota-Dwangwa Road (USD 49.7 million) planned to be approved in late 2022. Funds in the amount of USD 20 million earmarked for Agriculture Commercialization, Value Addition & Youth Agribusiness Project were repurposed and used for Agriculture Emergency Food Production Project.

These interventions aim at strengthening economic transformation by enhancing agriculture value chains, increasing mechanization, increasing access to finance, improving market linkages, and supporting crop diversification. These will underpin new income opportunities for emerging commercial farmers while strengthening linkages to small-scale farmers with increased focus on women and youth. Small industry development will be supported through agro-processing and light industrialization that will contribute to expand the economy and create jobs. The interventions in the water sector are expected to increase capacity of water reservoirs, small dams harvesting schemes, and improve access to potable water to free up time in rural areas especially for women: to allow them focus on other social economic activities. The interventions will support water resource management in key water basins such as Songwe River and Lake Malawi that impact on other sectors, such as energy, agriculture, tourism, and fisheries.

Looking forward, the AfDB plans to scale up its lending to the energy sector with a view to address power shortages. Under ADF-16, the Bank is considering two projects for financing from the Non-Sovereign Operation private sector window, Voltalia Kanengo Dzuwa Solar Project (USD 15.8 million) with a Partial Risk Guarantee facility for Voltalia Solar PV Project of USD 2.3 million and NBS Bank Limited (USD 7.9 million The AfDB continues to engage with the World Bank and other partners for co-financing arrangements of its pipeline operations. In view of this, the AfDB is taking the lead in promoting private investment in the energy sector, through PPPs and the use of innovative financing instruments, such as Partial Risk Guarantees.

The AfDB undertook a project completion review of the CSP2018-2022 in June 2022, to take stock of achievement of results and aligned with Malawi’s new National Development Plan and the Bank’s Long-Term Strategy in particular, the “High Fives” priorities, which include “Light up and Power Africa", “Feed Africa", “Industrialize Africa", “Integrate Africa” and “Improve the Quality of Life for the People of Africa". The outcome of the review will guide the formulation of its new CSP for the period 2023-2027. The new CSP will build on the experiences from the CSP 2018-2022 and focus on initiatives to close infrastructure gaps and spur diversification of the economy through industrialization and building resilience to persistent disasters. Government has requested that the Bank Priority Areas remain the same as in 2018-2022 CSP. Under ADF 16, the Bank in 2023 will finance Rumphi and Blantyre Water Supply and Sanitations Systems Project (USD 33.4 million) and Shire Valley Transformation Project phase two (USD 26 million).

Statistical Issues

As of October 20, 2022

I. Assessment of Data Adequacy for Surveillance
General: Data provision has shortcomings that are serious and significantly hamper surveillance. Most affected areas are: national accounts, fiscal, monetary and external sector statistics.
National Accounts: GDP was rebased from 2010 to 2017. Malawi’s nominal GDP for 2017 has been revised upwards by 38.4 percent from MK4,635.4 billion (US$6.35 billion) in the 2010 base year to MK6,417.3 billion (US$8.8 billion) in the 2017 base year. STA is providing a series of technical assistances (TA) to the National Statistics Office (NSO) on reconciling GDP by expenditure and GDP by production with rebased figures. GDP by production and by expenditure had a discrepancy of around 14 percent, which could be a shortcoming that significantly hampers surveillance. Following an assessment of available data sources in July 2022, GDP by production was still four percent larger than GDP by expenditure. The revised GDP estimates are expected to be published by end-2022.
Price Statistics: The NSO will update consumer price index (CPI) weights using expenditure data from the 5th Integrated Household Survey (IHS5), which was conducted from April 2019 to April 2020. Current CPI weights are based on the results of the 4th Integrated Household Survey (IHS4 which was conducted during 2016-2017. AFRITAC East (AFE) has provided technical assistance (TA) to the NSO to update the CPI in 2021, in particular with developing weights from expenditure data generated by the 5th IHS and according to COICOP. The producer price index (PPI) is based on outdated weights derived from the results of the Annual Economic Survey conducted in 2012. In addition to updating the weights, index coverage should be expanded to include other activities to better reflect the current structure of the economy. The NSO is in the process of developing export-import price indexes.
Government Finance Statistics: The accuracy and reliability of the data are affected by source data weaknesses. A key shortcoming in this area is the inadequate system of recording source data. In addition, there are serious quality problems, including data inconsistencies, that complicate program monitoring: Due primarily to differences in coverage, published data for the budgetary central government include a sizeable statistical discrepancy between above and below the line data. The coverage of government for above the line data is considerably narrower than the information on financing reported by RBM. While tax revenue data are received in a timely fashion, it is not always possible to reconcile them with deposits in the Malawi Government (MG) Account.
Government Finance Statistics: This is a result of the way taxes are reported, and timing differences between receipt of taxes and cleared funds being available for the government. The finances and operations of the Malawi Revenue Authority are also unusually opaque. Nontax revenue, including capital revenues collected by line ministries, is not properly accounted for in the fiscal reports prepared by the Ministry of Finance. The Ministry of Finance does not include zero-coupon promissory notes, recently issued to clear arrears, in its fiscal reporting. Interest payments are currently reported on a currency basis rather than based on the residency of the holder of the security. The authorities have received significant technical assistance from the Fund and other donors to strengthen expenditure monitoring and reporting, accounting, and statistical reporting, but results have lagged. The government has pledged to strengthen public financial management and fiscal reporting. The new IFMIS was rolled out to all MDAs on 1 July 2021, and authorities are working to produce comprehensive fiscal reports using the new system. The authorities are currently working with East AFRITAC to modify the chart of accounts and output-based structures so that they could more easily be realigned to the national strategy and be more readily understood. Annual government finance data for the Budgetary Central Government in a GFSM 2014 presentation are reported for publication in the Government Finance Statistics Yearbook (GFSY). However, these data are not disseminated domestically. STA TA missions have encouraged the authorities to compile and report high frequency data for Budget Central Government in GFSM 2014 framework and assisted them in compiling data for extrabudgetary units (EBUs) with the objective of expanding coverage to central government.
Monetary and Financial Statistics: STA has been working with the Reserve Bank of Malawi (RBM) over the past five years on establishing reporting based on Standardized Report Forms (SRFs) of monetary data. The RBM now submits to the Fund staff SRF-based monetary and financial statistics which is yet to published in the International Financial Statistics. RBM compiles and disseminates all core financial soundness indicators (FSIs) as well as nine additional FSIs. Malawi reports data on several series indicators of the Financial Access Survey (FAS), including mobile and internet banking, mobile money, gender-disaggregated data, and the two indicators (commercial bank branches per 100,000 adults and ATMs per 100,000 adults) adopted by the UN to monitor Target 8.10 of the Sustainable Development Goals (SDGs).
Financial Sector Surveillance: In response to a request from the Reserve Bank of Malawi (RBM), a technical assistance (TA) mission assisted RBM in improving its monetary operations framework and to facilitate the development of the broader financial markets in April 2019. MCM provided a mission to the RBM on domestic asset management strategy which took place in January 2020.
External sector statistics (ESS): The NSO is responsible for compiling trade statistics and balance of payments (BOP) data. The Trade in Goods data are compiled monthly, and the timeliness has improved to up to two months from the reference period but some inconsistencies remain. Annual BOP and international investment position (IIP) statistics are compiled up to 2021 with most of the standard components reported. Quarterly BOP and IIP data are not available. The lack of timeliness and accuracy of the ESS significantly hampers the staff’s work on projection and macroframework of the external sector development.
The ESS mission conducted by STA in March–April 2022 focused on improvements of the coverage, compilation, and timeliness of goods trade data, along with assessment of the BOP and IIP data compilation to follow up on previous TA missions (the latest in 2021). The mission noted quality issues in the trade data. The mission set out recommendations regarding source data collections, staff capacity, and intra-agency cooperation. The daily exchange rate data, monthly international reserves data as well as the FXI data are regularly reported from the Reserve Bank of Malawi (RBM). The reported international reserves data follow closely the data template on International Reserves and Foreign Currency Liquidity (IRFCL). The RBM has started reporting an independent line for the estimated size of pledged deposits. The value of pledged deposits is, however, subject to change upon the completion of the special audit of foreign exchange reserves. The RBM also started to submit a daily FX cashflow table on a regular basis. Regarding the external debt data, the government of Malawi (GOM) now provides granular breakdowns on top of the end-year stock data. In the current conjuncture of Malawi’s extremely vulnerable position to the external sector, reliable and timely ESS reporting is essential for diagnoses of any developments in the external sector. To move forward with improvements, the NSO, RBM, and the GOM should continue to improve coordination and take appropriate steps to implement TA recommendations to ensure a regular flow of data from this system for trade, BOP and IIP compilation; and the government should allocate sufficient resources for conducting regular surveys.
II. Data Standards and Quality
Malawi participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes essential macroeconomic and financial data on its National Summary Data Page since November 2016 (http://cb.malawi.opendataforafrica.org/uwkhibc/national-summary-data-page-nsdp). Timeliness of data disseminated under the e-GDDS would need to be improved.	Data ROSC was published on February 17, 2005.

View Table

I. Assessment of Data Adequacy for Surveillance
General: Data provision has shortcomings that are serious and significantly hamper surveillance. Most affected areas are: national accounts, fiscal, monetary and external sector statistics.
National Accounts: GDP was rebased from 2010 to 2017. Malawi’s nominal GDP for 2017 has been revised upwards by 38.4 percent from MK4,635.4 billion (US$6.35 billion) in the 2010 base year to MK6,417.3 billion (US$8.8 billion) in the 2017 base year. STA is providing a series of technical assistances (TA) to the National Statistics Office (NSO) on reconciling GDP by expenditure and GDP by production with rebased figures. GDP by production and by expenditure had a discrepancy of around 14 percent, which could be a shortcoming that significantly hampers surveillance. Following an assessment of available data sources in July 2022, GDP by production was still four percent larger than GDP by expenditure. The revised GDP estimates are expected to be published by end-2022.
Price Statistics: The NSO will update consumer price index (CPI) weights using expenditure data from the 5th Integrated Household Survey (IHS5), which was conducted from April 2019 to April 2020. Current CPI weights are based on the results of the 4th Integrated Household Survey (IHS4 which was conducted during 2016-2017. AFRITAC East (AFE) has provided technical assistance (TA) to the NSO to update the CPI in 2021, in particular with developing weights from expenditure data generated by the 5th IHS and according to COICOP. The producer price index (PPI) is based on outdated weights derived from the results of the Annual Economic Survey conducted in 2012. In addition to updating the weights, index coverage should be expanded to include other activities to better reflect the current structure of the economy. The NSO is in the process of developing export-import price indexes.
Government Finance Statistics: The accuracy and reliability of the data are affected by source data weaknesses. A key shortcoming in this area is the inadequate system of recording source data. In addition, there are serious quality problems, including data inconsistencies, that complicate program monitoring: Due primarily to differences in coverage, published data for the budgetary central government include a sizeable statistical discrepancy between above and below the line data. The coverage of government for above the line data is considerably narrower than the information on financing reported by RBM. While tax revenue data are received in a timely fashion, it is not always possible to reconcile them with deposits in the Malawi Government (MG) Account.
Government Finance Statistics: This is a result of the way taxes are reported, and timing differences between receipt of taxes and cleared funds being available for the government. The finances and operations of the Malawi Revenue Authority are also unusually opaque. Nontax revenue, including capital revenues collected by line ministries, is not properly accounted for in the fiscal reports prepared by the Ministry of Finance. The Ministry of Finance does not include zero-coupon promissory notes, recently issued to clear arrears, in its fiscal reporting. Interest payments are currently reported on a currency basis rather than based on the residency of the holder of the security. The authorities have received significant technical assistance from the Fund and other donors to strengthen expenditure monitoring and reporting, accounting, and statistical reporting, but results have lagged. The government has pledged to strengthen public financial management and fiscal reporting. The new IFMIS was rolled out to all MDAs on 1 July 2021, and authorities are working to produce comprehensive fiscal reports using the new system. The authorities are currently working with East AFRITAC to modify the chart of accounts and output-based structures so that they could more easily be realigned to the national strategy and be more readily understood. Annual government finance data for the Budgetary Central Government in a GFSM 2014 presentation are reported for publication in the Government Finance Statistics Yearbook (GFSY). However, these data are not disseminated domestically. STA TA missions have encouraged the authorities to compile and report high frequency data for Budget Central Government in GFSM 2014 framework and assisted them in compiling data for extrabudgetary units (EBUs) with the objective of expanding coverage to central government.
Monetary and Financial Statistics: STA has been working with the Reserve Bank of Malawi (RBM) over the past five years on establishing reporting based on Standardized Report Forms (SRFs) of monetary data. The RBM now submits to the Fund staff SRF-based monetary and financial statistics which is yet to published in the International Financial Statistics. RBM compiles and disseminates all core financial soundness indicators (FSIs) as well as nine additional FSIs. Malawi reports data on several series indicators of the Financial Access Survey (FAS), including mobile and internet banking, mobile money, gender-disaggregated data, and the two indicators (commercial bank branches per 100,000 adults and ATMs per 100,000 adults) adopted by the UN to monitor Target 8.10 of the Sustainable Development Goals (SDGs).
Financial Sector Surveillance: In response to a request from the Reserve Bank of Malawi (RBM), a technical assistance (TA) mission assisted RBM in improving its monetary operations framework and to facilitate the development of the broader financial markets in April 2019. MCM provided a mission to the RBM on domestic asset management strategy which took place in January 2020.
External sector statistics (ESS): The NSO is responsible for compiling trade statistics and balance of payments (BOP) data. The Trade in Goods data are compiled monthly, and the timeliness has improved to up to two months from the reference period but some inconsistencies remain. Annual BOP and international investment position (IIP) statistics are compiled up to 2021 with most of the standard components reported. Quarterly BOP and IIP data are not available. The lack of timeliness and accuracy of the ESS significantly hampers the staff’s work on projection and macroframework of the external sector development.
The ESS mission conducted by STA in March–April 2022 focused on improvements of the coverage, compilation, and timeliness of goods trade data, along with assessment of the BOP and IIP data compilation to follow up on previous TA missions (the latest in 2021). The mission noted quality issues in the trade data. The mission set out recommendations regarding source data collections, staff capacity, and intra-agency cooperation. The daily exchange rate data, monthly international reserves data as well as the FXI data are regularly reported from the Reserve Bank of Malawi (RBM). The reported international reserves data follow closely the data template on International Reserves and Foreign Currency Liquidity (IRFCL). The RBM has started reporting an independent line for the estimated size of pledged deposits. The value of pledged deposits is, however, subject to change upon the completion of the special audit of foreign exchange reserves. The RBM also started to submit a daily FX cashflow table on a regular basis. Regarding the external debt data, the government of Malawi (GOM) now provides granular breakdowns on top of the end-year stock data. In the current conjuncture of Malawi’s extremely vulnerable position to the external sector, reliable and timely ESS reporting is essential for diagnoses of any developments in the external sector. To move forward with improvements, the NSO, RBM, and the GOM should continue to improve coordination and take appropriate steps to implement TA recommendations to ensure a regular flow of data from this system for trade, BOP and IIP compilation; and the government should allocate sufficient resources for conducting regular surveys.
II. Data Standards and Quality
Malawi participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes essential macroeconomic and financial data on its National Summary Data Page since November 2016 (http://cb.malawi.opendataforafrica.org/uwkhibc/national-summary-data-page-nsdp). Timeliness of data disseminated under the e-GDDS would need to be improved.	Data ROSC was published on February 17, 2005.