IMF says Malawi’s economic outlook remains difficult

Malawi’s economic outlook remains difficult reflecting the negative impact of weather-related shocks, the ongoing suspension of budget support, persistently high inflation and weaker global demand which could hurt the country’s exports, the International Monetary Fund (IMF) Executive Board has said.

President Mutharika meets IMF Head of Mission Oral Williams at Kamuzu Palace - Pic by Stanley Makut

President Mutharika meets IMF Head of Mission Oral Williams at Kamuzu Palace – Pic by Stanley Makut

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The global multi-lateral lender said in a statement at the end of the 2015 Article Four consultation with Malawi.

IMF said the real Growth Domestic Product (GDP) is projected to fall by 2.7 percentage points to three per cent due in large part to heavy floods in January followed by drought which resulted in an estimated decline of about 30 percent in the maize harvest (the main staple). An estimated 2.8 million persons remain at risk of food insecurity.

The funs also advises that with implementation of sound macroeconomic policies and structural reforms, it is expected that growth will rebound gradually over the medium term along with a decline in inflation.

“Growth is projected to rise gradually to about 5.5 per cent over the medium term. Inflation is expected to rise to 25.4 per cent at end-2015 and is estimated to ease in 2016 and reach single digits at end-2017 if fiscal and monetary policies tighten, and international prices for food and petroleum products remain low,” says the IMF in a statement released on Tuesday.

It said the external current account deficit will remain in the eight per cent range over the medium term reflecting the demand for imports associated with developmental projects, rapid population growth, and the slow pace of export diversification.

IMF is encouraging authorities to implement structural reforms to remove supply bottlenecks, increase agricultural productivity and improve the business environment

The global lenders also asked Malawi to accelerate public financial management reforms to restore trust and confidence in the budget process and foster donor re-engagement,

While commending economic reforms undertaken in mid-2012 under the Joyce Banda rule, which it says transformed the policy environment and greatly improved the outlook of the economy, the fund observes that uneven policy implementation, high inflation, and a weak balance of payments position continue to pose macroeconomic challenges.

“Furthermore, the ‘Cashgate’ scandal uncovered in 2013 involving a large-scale theft of public funds damaged Malawi’s economic outlook significantly,” says IMF.

With donor withdraw, IMF recommended broadening the tax base, strengthening tax compliance, and modernizing tax administration

The Fund emphasized that ensuring medium term fiscal sustainability while safeguarding social spending will require improvements in the allocation and targeting of public spending

IMF says directors welcomed Malawi’s commitment to the flexible exchange rate regime and the automatic fuel pricing mechanism, as they have served Malawi well.

The duns cautioned that changes to the fuel import regime involving a greater role for the state‑owned company should be transparent and include safeguards against the emergence of contingent liabilities for the budget.

IMF called for intensified efforts to enhance financial sector resilience and its role in fostering inclusive growth

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Kanyimbi
Guest

This is what the IMF wanted. Our Kwacha was strong during Bingu time and you forced us to reduce its power then withdrew the aid so that we should be suffering. Malawis economy was one of the fastest growing in the world but with the IMF policies you are punishing us. Foolish white pigs from the west.

choka phiri
Guest
APM thought he could run a nation without money or he missunderstood the donors. What he forgot is he is Muntharika and same DDP. By stealing votes he Believe he is a prof. And lived in US. He will get money from donors. Muzungu dont give a dam shit whether u are King or queen. How many professors who are president? Good professor are still teaching or doping research. He is even afraid to take up Cash gate of 2009 punishing small people. And expect donors to release their tax payers money? Or foreign company to come to Malawi. How… Read more »
ben
Guest
IMF afuna ife ti ife njala, dear malawians do you know what IMF are doing they are reducing our salries purchasing power everyday through depreciateion. For someone receving 100,000MK per month in June 2015 was equivalent to Usd220. Today in december 2015 that same 100,000MK per month when converted is Usd145.00. There policies are hurting us , we are becoming poor everyday, our economists Chuka and his team are dunderheads that they just follow IMF policies blindly without seeing the impact it has got on peoples income. Government needs to get serious about the depreciation as like this Malawi will… Read more »
sam
Guest

IMF has succeeded in its mission in improving the lives of the diplomatic community. All diplomats in malawi are living a very luxurious life, thanks to IMF Policies of flexible exchange rates. Diplomats are smiling there way to the bank they get extra kwachas when changing there dollars, they can afford posh cars duty free, lavish lifestyle. I dont think IMF cares about poor Malawians they are only here to serve the diplomats in Malawi. Let us dump IMF no country in the world has succeeded by following these pro rich policies.

James kotoki
Guest

All this is because of our idiotic leadership we have

WAMISALA
Guest

ALI NDI MWANA AGWILITSE
GUYS
AKULU AKULUWA
SAKUNENA CHILUNGAMO !!!

ngongoliwa
Guest

I don’t think apm wamvapo chilichonse apa, it’s too complicated for him.
This nids real brains kkkkkkkkk

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