MALAWI EARNS IMPROVED CREDIT RATING

UNCLAS LILONGWE 000196 SIPDIS STATE FOR AF/S, INR/AA STATE FOR EB/IFD/ODF, EB/IFD/OMA TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA USAID FOR AFR/SA, ODP/MCC SIPDIS E.O. 12958: N/A TAGS: ECON EAID EFIN PGOV MI SUBJECT: MALAWI EARNS IMPROVED CREDIT RATING ¶1. (U) Summary: Malawi's sovereign credit rating has improved from "CCC" to "B minus", according to a newly-released assessment by international credit rating agency Fitch Ratings. The Millennium Challenge-funded evaluation praises the sound fiscal management of the Mutharika government and predicts a stable outlook for Malawi's economy in the near term. End summary. ¶2. (U) As one of the key activities of Malawi's MCA Threshold program, Fitch Ratings was contracted to carry out a sovereign credit rating (SCR) assessment in November 2006. The primary objective was to provide a basic performance measurement for the GOM's reform program of anti-corruption measures and improved fiscal management. The Fitch visiting team met with a wide cross section of players in government, parliament, the financial sector, donors and the broader business community. The results of the assessment were released on March 6, and Malawi's SCR has been upgraded from "CCC" to "B minus with a stable outlook." ¶3. (U) The Fitch report cautions that Malawi must improve its ability to manage external borrowing to avoid a rapid accumulation of new debt, and must carefully manage its public finances in the run-up to national elections in 2009. It acknowledges the potential for improved current account and fiscal receipts from the new Kayelekera uranium mine project, scheduled to open late 2008. Fitch predicts that, with careful fiscal management and improved inflows, there is room for Malawi to progress to a higher rating within the "B" category. EASTHAM