African Development Bank (AfDB) says government should manage the macro-economic situation by reducing inflation and interest rates if Malawi is to attract private sector investment.
In a statement issued on Monday signed by AfDB country representative Andrew Mwaba at the end of the bank’s mission to Malawi, the executive directors have advised the country’s leadership that in the medium to long-term, they should place emphasis on investment in infrastructure and irrigated agriculture to build resilience and enhance productivity.
The bank noted with concern that Malawi is facing major challenges due to the difficult macro-economic situation, which is manifested by high inflation, depreciated currency, high interest rates and low growth as well as the severe food crisis arising from weather shocks.
The executive directors also bemoan lack of access to credit for the private sector which, it says is derailing growth.
The bank said it will deepen collaboration with local financial institutions to enhance financial inclusion.
The directors also pledged to continue assisting Malawi in building resilience and achieving sustainable development. “The Bank will support Malawi’s efforts to expand domestic resource mobilisation and wean the country off dependence on aid over time.
“The bank in collaboration with other DPs, will continue to support government initiatives on its socio-economic development trajectory,” said Mwaba in the statement.
However, the bank urged government to sustain the reform efforts, particularly in fiscal policy and Public Financial Management (PFM) to restore macroeconomic stability and instil private sector confidence.
“It is important for the country to manage the macro-economic situation and reduce inflation and interest rates in order to boost confidence in the private sector to invest in the country,” he said.
When the group met President Peter Mutharika last week, he pleaded with the bank not to abandon Malawi in terms of provision of budgetary support as other donors have done.
AfDB has provided to Malawi $26 million (about K20 billion) sector budget support targeting the health and education sectors.
Said Mutharika: “I would like to request the bank to continue providing support to the Government of Malawi, preferably through budget support which is our preferred mode of aid delivery as we continue implementing the [Public Finance Management] reforms.”
Nine AfDB executive directors, led by Sammy Zaghoual, visited Malawi from March 6 to 11. n