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Malawi: Letter of Intent, Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding
7 August 2006
International Monetary Fund (IMF)

The following item is a Letter of Intent of the government of Malawi, which describes the policies that Malawi intends to implement in the context of its request for financial support from the IMF. The document, which is the property of Malawi, is being made available on the IMF website by agreement with the member as a service to users of the IMF website.

Letter of Intent

Mr. Rodrigo de Rato y Figaredo
Managing Director
International Monetary Fund
Washington, DC 20431

Dear Mr. de Rato:

  1. The first review of the economic program supported by Malawi’s arrangement with the Fund under the Poverty Reduction and Growth Facility (PRGF) was completed on February 6, 2006. In the attached Supplement to the Memorandum of Economic and Financial Policies (MEFP) and Technical Memorandum of Understanding, we review progress in implementing the program in the fiscal year 2005/06 and update the macroeconomic framework and policy measures for 2006/07. The Government of Malawi believes that implementation of the PRGF-supported program through end-December 2005 was satisfactory: we met all the quantitative performance criteria for end-December 2005 by a comfortable margin.

  2. The government of Malawi requests the completion of the second review and the third disbursement under the PRGF arrangement in the amount of SDR4.9245 million. In this connection, the Government also requests the IMF Executive Board to grant waivers for the nonobservance of the structural performance criteria relating to the budget ceilings module in the payment system and the new travel policy. The government expects that the new travel policy will be implemented by end-September 2006, and agrees that this should be a structural benchmark for the third review scheduled for mid-December 2006. The fifth disbursement will be subject to the fourth review expected to be completed in May 2007.

  3. The Government of Malawi is committed to continued strong performance under the economic program supported by the PRGF arrangement. The Government has also been diligently implementing its poverty reduction strategy, and has made good progress in meeting most of the triggers for reaching the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The Government of Malawi therefore believes that Malawi should reach the HIPC Initiative completion point at the time of the second review of the PRGF. Reaching the HIPC Initiative completion point would also immediately qualify Malawi for further debt relief under the Multilateral Debt Relief Initiative. The debt relief provided under these two initiatives will assist Malawi in achieving its growth and poverty reduction objectives.
  4. The Government of Malawi believes that the policies set forth in the attached MEFP are adequate to achieve the objectives of its program, but will take any further measures that may become appropriate for this purpose. We will consult with the IMF on the adoption of these measures, and in advance of revisions to the policies contained in the supplementary MEFP, in accordance with the IMF’s policies on such consultation.

  5. The Government of Malawi authorizes the IMF to make this letter, the attached supplementary MEFP, and the IMF staff report available to the public, including through the IMF internet website.
Sincerely yours,

Goodall Gondwe, Minister of Finance
Victor Mbewe, Governor - Reserve Bank of Malawi

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