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Economic future uncertain—IMF

The International Monetary Fund (IMF) has said the future of the country’s economy remains unclear in the face of the coronavirus pandemic and the continued political impasse.

A statement released at the end of the fourth Extended Credit Facility (ECF) programme review meetings on Tuesday indicates that prospects for the remainder of the year will depend on the extent of transmission to Malawi of Covid-19 and the magnitude of associated global and regional economic spillovers.

In the statement, IMF Mission Chief for Malawi, Pritha Mitra, said despite threats posed by the pandemic and the political impasse, the economy may grow in the medium to long-term. “With the evolution of the Covid-19 outbreak still largely unknown, the economic outlook is subject to substantial uncertainty.

The recent strong agricultural harvests and reconstruction activity after Cyclone Idai have boosted growth but the growth path for the remainder of the year will depend on the extent of transmission to Malawi of Covid-19 and the magnitude of associated global and regional economic spillovers.

“Notwithstanding the effects of Covid-19 on the economy, over the medium-term, growth may rise further to between 6 and 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,” Mitra said.

She further projected that inflation may decline from 11.5 percent at end of 2019 to 9.3 percent at end of 2020, as elevated food inflation moderates, and gradually converge to 5 percent over the medium term.

The statement highlights that under the review, it transpired that authorities regained control over the budget in the first-half of 2019/20 financial year but maintaining this performance for the second-half of the fiscal year will be challenging. IMF Resident Representative, Farayi Gwenhamo, said determinations as to whether the performance is on track and if another tranche will be disbursed will be made later as discussions are continuing.

In November last year, the IMF approved $43.3 million to Malawi under the ECF programme, bringing total disbursements under the arrangement to $73.9 million.

The Fund also released $38.1 million to assist the government meet new balance of payment needs associated with reconstruction following Cyclone Idai.

The three-year ECF arrangement was approved on April 30, 2018 for $107.7 million to support the country’s economic and financial reforms.

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