An International Monetary Fund (IMF) team led by Mika Saito held discussions during May 25-June 3, 2022, via hybrid and in-person meetings in Lilongwe on the authorities’ Request for a Four-Year Extended Credit Facility (ECF) Arrangement.
The authorities have requested an arrangement in the back of the protracted balance of payments problem. While IMF support and its catalytic role in mobilizing donor support are critical at this juncture, being able to restore debt sustainability and resolving the misreporting case are pre-requisites for such support. While the authorities are addressing these issues, the IMF team conducted a mission to agree on a macroeconomic framework, policies, and reforms.
At the conclusion of these discussions, Ms Saito, Deputy Division Chief in the African Department of the IMF issued the following statement:
“We had positive and productive discussions with the authorities on the current macroeconomic conditions and policies to steer the country towards macroeconomic stability and a sustainable debt path.
“We welcome the authorities’ recent steps to normalize the forex market in line with the recommendations of Article IV Consultation concluded by the IMF Executive Board in December 2021 to help to improve foreign exchange availability.
“The special audit of the official foreign exchange reserves of the Reserve Bank of Malawi (RBM) is now in the final stages. This report will form the basis for consideration of the pending misreporting of RBM Foreign Exchange Reserves by the IMF’s Executive Board.
“The authorities have engaged a debt advisor to support their efforts in addressing Malawi’s unsustainable public debt. As this work progresses, the discussions with the authorities will resume towards a staff-level agreement.
“The IMF staff held meetings with Minister of Finance and Economic Affairs Sosten Gwengwe, Reserve Bank of Malawi Governor Wilson Banda, and senior government and Reserve Bank of Malawi officials, and the private sector. The mission team thanks to the Malawian authorities for their hospitality and productive discussions.”
In conclusion, three following points were noted:
- The Malawian authorities and IMF staff had positive and productive discussions on policies needed to restore macroeconomic stability, ensure public debt sustainability, and advance structural reforms to support sustainable and inclusive growth and address the impact of the COVID pandemic, spillovers from the war in Ukraine and climate-related shocks.
- The authorities’ recent decision to normalize the foreign exchange market to help address foreign exchange availability is welcome. The near-completion of the audit of Reserve Bank of Malawi (RBM) foreign exchange reserves should pave way for consideration by the IMF’s Executive Board of the misreporting of the RBM Foreign Exchange Reserve case.
- The authorities have recently engaged a debt advisor to support their efforts to address the unsustainability of Malawi’s public debt. As work progresses on this process, IMF staff will be re-engaging the authorities towards a staff-level agreement.