Malawi – Frequently Asked Questions on ECF Termination
Last Updated: May 14, 2025
- What is the status of Malawi's ECF program?
- What are the critical issues that have prevented Malawi from concluding the review?
- What is macroeconomic stability and why is it important?
- What are the IMF’s key policy recommendations for macroeconomic stability in Malawi?
- What is the nature of the Fund’s engagement in Malawi when the ECF expires?
What is the status of Malawi's ECF program?
Malawi's Extended Credit Facility program was approved on November 14, 2023, with the goal of supporting the country’s efforts to restore macroeconomic stability and achieve a sustainable, poverty reducing growth. While discussions between the IMF and the Malawian authorities have been ongoing, no program review has been completed.
In accordance with IMF financing policies for low-income countries, the program automatically terminated on May 14, 2025, as no review has been completed over an 18-month period.
What are the critical issues that have prevented Malawi from concluding the review?
Program implementation faced numerous challenges and, importantly, was not able to achieve macroeconomic stability. Notably, fiscal discipline has proven difficult to maintain in the current environment due to elevated spending pressures and insufficient revenue mobilization efforts. Rebuilding international reserve buffers has been challenging with the current foreign exchange system. The external debt restructuring process—needed to restore debt sustainability—has not yet been concluded.
What is macroeconomic stability and why is it important?
Macroeconomic stability refers to a situation where key economic relationships (such as those between how much an economy produces versus domestic demand, government revenues and expenditure, savings and investment, and the balance of payments) are broadly sustainable. Some degree of imbalances, such as fiscal and current account deficits are consistent with economic stability if they can be sustainably financed. Some symptoms of this instability are excessively high inflation, shortage of goods, or foreign exchange rationing. The exact mix is country-specific. Macroeconomic stability is essential for achieving high and sustainable growth and should be a key component of any poverty reduction strategy.
What are the IMF’s key policy recommendations for macroeconomic stability in Malawi?
IMF advice to Malawi has focused on a set of policies aimed at restoring macroeconomic stability in Malawi. These include, inter alia, policies to: strengthen fiscal discipline and sustainability through revenue mobilization and improved public financial management, a key ingredient to achieving debt sustainability and supporting appropriate monetary policy to contain money growth and curb inflation; rebuild international reserves and facilitate an exchange rate regime that supports external stability; restructure external commercial debt to support debt sustainability; and structural reforms to improve governance and unleash productivity to support higher growth and diversify exports.
In addition to restoring macroeconomic stability, the IMF’s policy advice supports the authorities’ efforts to build a foundation for inclusive and sustainable growth and address weaknesses in governance and institutions.
What is the nature of the Fund’s engagement in Malawi when the ECF expires?
As part of the IMF’s surveillance mandate, the IMF offers policy advice to support macroeconomic stability and propose reforms to support sustainable and inclusive growth. While the ECF arrangement has expired, the IMF is currently holding Article IV consultations with the Malawian authorities.
The IMF continues to work with the authorities in other ways within its mandate to support Malawi. This includes providing technical assistance to help modernize Malawi’s economic policies, strengthen its institutions and their capacity to implement reforms. For example, IMF staff continues to work in partnership with the Malawian authorities, providing technical assistance to help enhance tax collection and budget execution, modernize monetary and exchange rate policies, and improve data quality.
In addition, a range of tailored financing tools is still available to give Malawi some breathing room to adjust policies in an orderly manner. These include concessional financial support (currently at zero interest rates) through the Poverty Reduction and Growth Trust. Any programmatic lending arrangement requires strong policy ownership and commitment from the Government.