Malawi faces huge economichurdles, financing needs—IMF

The International Monetary Fund (IMF) says Malawi and other low-income countries continue to face huge economic challenges and financing needs.

Writing on her blog, IMF managing director Kristalina Georgieva said on Friday that while Malawi and counterparts in fragile and conflict-affected States have suffered from the pandemic and a succession of economic shocks, today they face scarce financing, high inflation, persistent food insecurity, rising debt vulnerabilities and geo-political tensions.

She said: “The challenges facing low-income countries have grown immensely in recent years. We have revised down our growth projections for low-income countries, whose per capita income growth is falling further behind the rates needed to catch up with advanced economies.

“This threatens to reverse a decades-long trend of steadily converging living standards. Without urgent action and more support, there is little chance of them making up the lost ground.”

Georgieva said the IMF estimates low-income countries’ additional financing needs to accelerate growth and put them back on a path to income convergence with advanced economies to be about $440 billion (about K455 trillion) over the five years through 2026.

She said while domestic reforms to boost growth, strengthen public finances and raise more domestic revenue should help address this financing need, more international support is also needed,especially as official development assistance continues to fall short of the United Nations’ target of 0.7 percent of gross national income.

On November 21 2022, the IMF board of directors approved a disbursement of $88.3 million (about K91 billion) through a Rapid Credit Facility (RCF) initialised through the Food Shock Window.

The emergency financing was aimed at helping Malawi address the urgent balance of payment and fiscal needs related to the global food crisis.

IMF resident representative Farai Gwenhamo said at the time that the clinching of the RCF does not invalidate the country from seeking the Extended Credit Facility, but Malawi has to meet a set of prescribed conditions, including building foreign exchange reserves and aligning the foreign exchange rate.