Malawi: First Review Under the Staff-Monitored Program with Executive Board Involvement-Press Release; Staff Report; and Statement by the Executive Director for Malawi

Malawi has been affected by a series of shocks— including an outbreak of cholera and Cyclone Freddy, which caused significant loss of life and damage to infrastructure—since the approval of the Staff-Monitored Program with Executive Board Involvement (PMB) on November 11, 2022, and the disbursement of $88.3 million in emergency financing under the Food Shock Window of the Rapid Credit Facility on November 21, 2022. In this context, growth has been weaker and inflation higher than expected. The fiscal deficit in FY2022/23 (April/March) was larger than expected at the time of the PMB. Meanwhile, external strains—including shortage of foreign exchange, difficulties securing trade credit, and a widening spread between official and bureau exchange rates—have heightened. Despite a sharp reduction in the current account deficit, accumulation of foreign exchange reserves has been slower than expected, implying an increase in informal trade.