IMF staff, Malawi reach staff-level agreement

The International Monetary Fund (IMF) staff and Malawian authorities have successfully reached a staff-level agreement on the Second and last Review of the Staff Monitored Program with Executive Board Involvement. This agreement encompasses macroeconomic and financial policies and reforms that will be backed by a new 48-month financing arrangement under the Extended Credit Facility, totaling about $174 million. The deal, however, is subject to final approval by the IMF Management and Executive Board, which is expected to take place in mid-November pending the reception of necessary financing assurances. Nelnan Koumtingue, Resident Representative of Malawi at the IMF, elaborated on the key aspects of the agreement and the significance of the reforms. Malawi has been grappling with debt challenges, leading the fiscal policy under this program to prioritize restoring the country's debt sustainability in the medium term. This goal will be pursued through a blend of strategies aimed at boosting revenue and managing expenditure effectively. By creating this financial stability, Malawi aims to allocate more resources towards social spending and infrastructure development, thereby fostering economic growth. Inflation has been a pressing issue in the country, prompting monetary policies to target price stabilization for attracting investments. The external sector will witness efforts to promote a market-driven exchange rate system while bolstering reserves to the equivalent of four months of import value. These measures are designed to equip Malawi with a financial buffer to withstand future economic shocks. The policy framework will also incorporate governance reforms and institutional strengthening to advance progress towards Malawi Vision 2063. Koumtingue highlighted the critical role of securing financing assurances from Malawi's bilateral creditors to ensure that funds mobilized through the program are channeled primarily towards the welfare of the Malawian population and essential development needs. The four-year program sets forth gradual adjustments to achieve a primary balance by its conclusion. This balance is pivotal in stabilizing the country's debt landscape and attaining a sustainable inflation rate aligned with national objectives. Furthermore, the aim is to amass foreign exchange reserves over the program's tenure to cover four months of imports, a vital requirement tailored for Malawi's circumstances. The phased approach to reforms over the program's duration signifies a comprehensive effort to fortify Malawi's economic foundation and set it on a trajectory towards enhanced stability and growth.