COVID-19: IMF paints uncertain outlook on Mw’s economy

International Monetary Fund Headquarters in Washington

A recent International Monetary Fund (IMF) mission to Malawi has noted that with the evolution of the coronavirus outbreak still largely unknown, the country’s economic outlook is subject to substantial uncertainty.

Led by the Mission’s Chief for Malawi Pritha Mitra, from 10th -23rd March 2020, it says although the recent strong agricultural harvests and reconstruction activity after Cyclone Idai have boosted growth, the growth path for the remainder of the year will depend on the extent of transmission to Malawi of COVID-19.

 “Notwithstanding the effects of COVID-19 on the economy, over the medium-term, growth may rise further to 6-7 percent, backed by infrastructure that is more resilient to shocks from climate change, improved access to finance, crop diversification, and an improved business climate.

“Inflation is anticipated to decline from 11.5 percent at end-2019 to 9.3 percent at end-2020, as elevated food inflation moderates, and gradually converge to 5 percent over the medium term

“The key risk is the potential for deeper disruption to economic activity in Malawi from the spread of COVID-19,” read the IMF statement.

The Washington statement observed that although authorities regained control over the budget in the first half of the 2019-2020 financial year, maintaining this performance for the second half of the fiscal year will be quite challenging.

IMF
Mwanamvekha with an IMF Mission in Malawi in September 2019 in this file photo

It attributed the development to the pressures from COVID-19 and political uncertainties ahead of the fresh Presidential elections which it says are weighing on revenues.

“ At the same time, expenditures have appropriately been increased to cover the cost of the upcoming election and to finance urgent health care preparations consistent with the government’s COVID-19 contingency plan developed with support from the WHO and other development partners,” the statement indicated.

Some of the highlights in the fourth review of the three-year arrangement for Malawi under the Extended Credit Facility (ECF); are government’s commitment to repaying arrears accumulated in recent years and addressing shortfalls in the system which led to them.

It among others cited that strengthening transparency in the budget process, the medium-term budgetary framework, cash management, and routinized bank reconciliation as well as gradual upgrading of the existing public financial management system will be critical areas to be mindful of.

IMF
RBM  Governor interacts with IMF Malawi Representative in this file photo

The Bretton-woods institution lauded government’s monetary policy which  remains focused on preserving price stability over the medium-term, the continued improvement in banking system resilience and non-performing loans (NPLs) declining over the last three years.

It stated that Malawi’s debt has risen; however both its external and overall risk of debt distress remains “moderate.”

The statement stressed on the need to improve public investment management, oversight and monitoring of state-owned enterprises and other parastatals, and debt management in order to reduce risks and benefits from more efficient and better quality spending.

Among others the IMF delegation held meetings with Minister of Finance Joseph Mwanamvekha, Governor of the Reserve Bank of Malawi (RBM) Dalitso Kabambe, other senior government and RBM officials, a broad range of national stakeholders outside government as well as representatives of Malawi’s development partners.