A South African-based financial services analyst has advised Malawi authorities at the centre of recovery plan to strike a balance in ensuring that the inflation rate does not runaway and that the economy has room for growth.
Malawiâ€™s inflation rate for August 2012, according to the National Statistical Office (NSO), jumped 3.8 percentage points to 25.5 percent from 21.7 percent the month before, against governmentâ€™s annual average projection of 18.4 percent.
National Bank of Malawi (NBM), in its economic newsletter for August 2012, has predicted that real gross domestic product (GDP) growth will be subdued this year.
NBM indicated that growth will slow to a seven-year low of between two and three percent on account of low tobacco revenues, high inflation and credit contraction as a result of high interest rates.
Peter De Beyer, a non-executive director at the Johannesburg Stock Exchange (JSE)-listed Oceana Group Limited, responding to a question from Business News on what the government should do in view of the austerity measures it has instituted, noted it is necessary to ensure that the significant devaluation of the kwacha and its subsequent floatation [effected on May 7] does not result in runaway inflation.
â€œMalawi has a very high inflation rate at the moment. One has to be extremely careful in managing an economy when inflation gets to those levels that it doesnâ€™t become a runaway hyper-inflation.
â€œI think government and the Reserve Bank of Malawi are very focused to ensure that doesnâ€™t happen,â€ he cautioned.
But De Beyer said government has to ensure that the economy is not killed with the measures it has put in place to the economy to recover.
The Joyce Banda administration has agreed to roll-out an 18-month-plus economic recovery plan (ERP) with the hope of cushioning Malawians from the economic problems being experienced.
De Beyer has thus called on the government to ensure that donor funds are used to â€œensure the bottom end of the income spectrum who are feeling a lot of pain from the measures at the moment are given some relief and that the money is used to invested productively in building infrastructure for economic growthâ€.