IMF hails Malawi’s economic growth

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The International Monetary Fund (IMF) has hailed Malawi’s economic growth and the country’s inflation which it says remains on a declining trend.

This is according to a press statement that IMF Mission Chief Prithra Mitra issued on Friday after meeting Minister of Finance, Goodall Gondwe and Reserve Bank Governor, Dalitso Kabambe among other officials on the completion of the first review of the three year arrangement for Malawi under Extended Credit Facility (ECF) in Malawi’s capital, Lilongwe.

Gondwe

Gondwe (L) and Mitra

According to the statement by IMF, Malawi’s economy continues to grow while inflation remains on a declining trend. Moderate economic growth is likely to strengthen in 2019, followed by a rise to as high as 7 percent over the medium term.

“Growth will be backed by improved electricity generation, better irrigation infrastructure and cropping techniques, greater access to finance, and an improved business climate. Inflation is expected to reach 9.5 percent at end-2018 before gradually converging to around 5 percent over the medium term.

“Performance under the program has been good. Most quantitative performance criteria (QPC) for end-June were met, with the criteria on international reserves and the Reserve Bank of Malawi’s holdings of government securities significantly overperforming,” reads the statement.

IMF says monetary policy remains targeted at maintaining the inflation rate in single digits by end-2018 and preserving price stability over the medium term.

According to IMF, the target on the primary balance (i.e., fiscal balance that excludes interest payments) was missed due to larger-than-expected­ maize purchases—to ensure food security after poor maize harvests in some parts of the country—and increases in spending to hold elections.

The IMF says it expects Malawi’s fiscal policy to focus on actions to restore budget balance to correct for last year’s spending overruns and help cope with any shortfalls in budget support.

“Key reform areas are to improve debt management and public financial management—including­ routinizing bank reconciliation, improving commitment control and cash management, and enhancing the transparency of the budget process,” reads the statement.

The IMF in the statement stresses the need to ensure that financing of infrastructure projects designed to accelerate growth and poverty reduction preserves debt sustainability.

The institution says this can be achieved by rigorous prioritization of projects, strengthening project management framework and enhancing oversight and monitoring of state-owned enterprises and other parastatals.

The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.

 

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