The Malawian authorities and IMF staff had a positive and productive discussion about policies needed to restore macroeconomic stability, ensure public debt sustainability, and advance structural reforms to support sustainable and inclusive growth, as well as address the impact of the COVID pandemic, spillovers from the Ukraine conflict, and climate-related shocks; the authorities’ recent decision to normalize the foreign exchange market to help address foreign exchange availability is welcomed.
The near-completion of the audit of the Reserve Bank of Malawi’s (RBM) foreign exchange reserves should allow the IMF’s Executive Board to consider the case of the RBM Foreign Exchange Reserve misreporting; the authorities have recently hired a debt advisor to assist them in their efforts to address Malawi’s public debt’s unsustainable nature. As the process moves further, IMF personnel will reengage the authorities in order to reach a staff-level agreement.
Between May 25 and June 3, 2022, an IMF team led by Mika Saito met in Lilongwe for hybrid and in-person meetings to discuss the authorities’ Request for a Four-Year Extended Credit Facility (ECF) Arrangement.
The authorities have urged a solution to the long-running balance of payments problem. While the IMF’s assistance and catalytic role in organizing donor support are crucial at this time, restoring debt sustainability and resolving the misreporting case are prerequisites for such assistance. The IMF team conducted a mission to agree on a macroeconomic framework, policies, and reforms while the authorities dealt with these challenges.
At the conclusion of these discussions, Ms. Saito 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 Executive Board of the IMF.
“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 the Malawian authorities for their hospitality and productive discussions.”