The Economics Association of Malawi (Ecama) has told Finance Minister Dr. Ken Lipenga that the forthcoming 2013/14 National Budget must ensure bringing down inflation rate back to single-digit lane.
Ecama executive director Nelson Mkandawire said this on Friday when he presented a paper as part of Ecama’s input into the 2013/14 fiscal budget build-up.
“We will have comfort if the budget helps move inflation to single-digit. At present it is quite high and does not look good,” said Mkandawire.
Year-on-year headline inflation for the month of February has hit 37.9 percent which presents a 2.8 percentage point higher than that recorded in the month of January 2013, on account of recent adjustment in the prices of maize and maize flour and also the adjustment in the price of fuel.
But analysts are optimistic that this year’s maize surplus-seen at 740 000 metric tons-would help cushion the mounting pressure on inflation as food availability dictates movement of the country’s consumer price index (CPI).
He said Ecama would be in a ‘comfort zone’ if deposit rates among commercial banks are thrown below inflation rate to enable depositors real savings beat the average level of price increases.
He faulted the prevailing situation where banks are charging interest rates as high as 45 percent which he said has widened up interest rate spread-the gap between deposits and lending rates.
Mkandawire urged the government of Malawi to ensure that the 2013/14 budget stimulates inclusive growth by expanding employment opportunities and also reduce poverty levels significantly.
“The budget should prioritise single window shop to boost the business environment for Malawi, especially lagging areas on doing business index,” said Mkandawire when touching on trade and mining industry.
He also said emphasis should also be placed on generating exports and encourage manufacturing ,adding that Malawi government needs to become more explicit in the strategies for implementing the National Export Strategy (NES) thus generating more foreign reserves.
Mkandawire added that there is need for Malawi to have significant locally owned and export oriented investments financed by resources from the budget or development aid.
Commenting on fiscal discipline, Mkandawire said there is an urgent need to introduce automated systems or banks in all government departments that are involved in cash generation such as Ministry of Lands and Housing, hospitals, city councils, among others.
He said such a situation will help ensure that the little that is collected is properly accounted for.
According to Mkandawire, government must also ensure sticking to economic reforms currently being implemented and also align fiscal and monetary policies.
Reacting to Ecama propositions, Lipenga hailed Mkandawire for the suggestions and assured that the government of Malawi is keen to put on board some of the suggestions in the coming budget. n