Finance, Economic Planning and Development Minister Goodall Gondwe on Tuesday sounded upbeat on the future of the struggling economy, projecting that the economy could stabilise somewhere in May this year but depending on the weather pattern and climatic conditions.
“We expect light at the end of the tunnel which means stabilisation of the economy. If the weather behaves as well as we want, we should be stable somewhere in may,” said Gondwe yesterday at Capital Hill.
The minister, who described the just-ended year as a mixed bag, expressed optimism that by May 2016, both inflation and interest rates should be lowering due to a controlled government over-borrowing then.
Currently, most key macroeconomic indicators are still hostile to private sector investment and household consumption, with inflation remaining stubbornly high at 24.6 percent as of November 2015, with interest rate hovering above 40 percent among most commercial banks.
“We should be able to see low inflation; we should be able to have controlled government borrowing and therefore diminishing demand side of inflation as well as the supply side of inflation,” said Gondwe.
He said by reducing both inflation and interest rates, government will be in a better position to expand economic activity that will allow induced revenue generation by the Malawi Revenue Authority (MRA).
Reflecting on the year 2015, Gondwe lamented that the country had a bad year in terms of marketing her tobacco at the auction floors and the overall impact of floods during the year.
During the last tobacco marketing season, the country sold 192.7 million kilograms of all types of tobacco against a trade requirement of 179 million kilograms.
The country, however, earned $337.4 million (about K221billion) in revenue, down from $361.6 million (about K236.8billion) worth of revenue realised in the 2014 tobacco marketing season, representing an 8 percent drop.
But the minister also bemoaned the negative impact of the Kwacha depreciation against major currencies which he said eroded the purchasing power of many average Malawians, among other negative shocks to the economy.
Quizzed on the likelihood of budget support resumption this year, Gondwe said while in Washington DC, United States of America (USA) last month, he received strong indications that the World Bank and the European Union would resume budget support before the end of the financial year 2015/16.
Last week, Economics Association of Malawi (Ecama) President Henry Kachaje cast doubt that the economy would recover in 2016, and said assuming it would recover as projected by authorities, the poor will be left even more destitute than was the situation before recovery.