The decline in foreign inflows is expected to have a direct impact on the country’s economic performance and growth prospects, an economic analyst has warned.
According to the Reserve Bank of Malawi (RBM), during the month of December, foreign inflows dropped by K5.6 billion to K5.1 billion from an increase of K7.8 billion to K10.7 billion recorded in November 2017.
On an annual basis, foreign receipts dropped by K310.3 million from K5.4 billion recorded in December 2016.
In an interview on Wednesday, economist Gilbert Kachamba said the dwindling foreign inflows have many implications including a reduction in foreign currency reserves which is an indicator of poor economic performance.
He said foreign inflows may also affect growth in general for a country which predominantly imports goods.
“The problem of growth is stemming from the poor economic performance as indicated by the drop of foreign inflows. As prices of imports are getting higher it means more dollars will be needed to buy the necessities that we need as a nation and the inflow of these dollars are dwindling meaning that we will be focusing on essential imports like drugs, fertiliser, fuel and not capital goods,” he said.
But RBM spokesperson Mbane Ngwira said the drop is a reflection of how the economy perfomed last year and not an indication of how it is going to perform in future.
In an earlier interview, immediate past president of the Economics Association of Malawi (Ecama) Henry Kachaje said reduced foreign inflows can be directly attributed to the unpredictability of off budget support, which is determined by various projects implementation, unlike with direct budget support, where disbursements are predictable and timely.
Meanwhile, estimated official reserves stood at $749.7 million at end December 2017, representing 3.6 months of prospective import cover. This was relatively higher than the November 2017 position of $745.1 million, and the December 2016 position of $600.4 million.
President Peter Mutharika has in recent weeks been bragging about the country attaining six months of import cover, referring to the combined value of private sector and official reserves.