World Bank pledges support to restore economic stability

 In the face of high inflation, rising fiscal deficits and low foreign exchange reserves, the World Bank says it is working with the Malawi Government to develop an analytical tool to help restore economic stability.

In an e-mailed response on Tuesday, World Bank country director Firas Raad said they are working on preparing a public management finance review in collaboration with the Ministry of Finance and Economic Affairs.

He said: “This is an analytical product which we hope will help guide the ministry’s fiscal consolidation efforts.”

Raad: We will help guide PFM reforms

“Fiscal consolidation is a government policy that aims to reduce a country’s debts and deficits by reducing expenditures and boosting revenue generation.”

Minister of Finance and Economic Affairs spokesperson Williams Banda confirmed the arrangemet and said government will issue a statement.

The review will complement the Malawi Economic Monitor, a biennial publication that allows for continuous policy dialogue around macroeconomic and structural reforms, and a second Development Policy Operation (DPO) with the Government, which is currently under development.

The DPO has some important public finance management reforms embedded in its design.

The move comes at a time Malawi is experiencing several macroeconomic imbalances, with the country missing its inflation and growth targets anticipated in the 2024/25 National Budget.

An analysis contained in the World Bank’s latest issue of the Africa Pulse shows that Malawi has one of the highest deficits alongside Burundi, Namibia and Rwanda.

Reads the report in part: “These deficits contribute to exchange rate instability, as seen in Malawi, where the deficit is expected to reach 18.7 percent of gross domestic product in 2024, putting pressure on international reserves.”

Economics Association of Malawi acting president Bertha Bangara-Chikadza, in an interview, cautioned that Malawi would have a tough time committing to its public finance management (PFM) reforms.

She said the country’s rising debt could restrict government’s capacity to allocate sufficient resources required to meet the PFM reform goals regardless of the financial support from Malawi’s development partners

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