The International Monetary Fund (IMF) says it has made considerable progress with Malawi in designing a comprehensive package of policies and reforms that could underpin a programme under the Extended Credit Facility (ECF) arrangement.

The IMF says the proposed programme would support Malawi’s efforts to restore macroeconomic stability and promote inclusive and resilient economic growth.

In a statement issued after its September 22 to October 6 mission to Lilongwe, the IMF said Malawi has made progress in implementing reforms aimed at strengthening fiscal discipline, reducing the public debt burden and improving market functioning.

The IMF Mission Chief for Malawi, Justin Tyson, said domestic revenue is increasing while government expenditure has been tightly controlled in line with the 2026/27 national budget targets.

Tyson said discussions are also advanced on measures to reduce the burden of public debt, while inflation has been moderating in recent months, although non-food inflation remains high.

However, the IMF says Malawi’s economic outlook remains challenging due to climate shocks, declining demand for tobacco and external pressures linked to the war in the Middle East.

The Fund has also warned that adverse weather conditions associated with the El Niño event could affect agricultural production and worsen food insecurity in the region.

Discussions between the IMF and government will continue to finalise the policy package that could support an ECF-backed programme.

The proposed reforms include continued fiscal consolidation while protecting social spending, stronger monetary policy, maintaining financial sector stability and addressing market distortions.

The IMF also says strengthening governance and implementing structural reforms will be key to restoring macroeconomic stability.