Fiscal consolidation key to recovery—IMF
The International Monetary Fund (IMF) says bringing fiscal consolidation back on credible path focusing on 2019/20 National Budget is key to recovery.
IMF resident representative, Jack Ree, whose tour of Malawi ends this month, said growth, is on a recovery path despite ‘daunting dangers in the ways ahead of Malawi’.
He observed that Malawi’s structural problems rests in the repetition growth relapse and inflation reversals since 1994, which was very much led by political economy.
Ree further suggests that breaking away from all that will require some courage.
“During the last three years, inflation came down from 25 percent to below 10 percent and bank reconciliation has been done under the International Monetary Fund (IMF) programme. And inflation is behaving despite worries about high maize price. Kwacha’s exchange rate remains stable despite healthy levels of volatility.
“I see lots of hopes, a window of opportunity for Malawi to break away from its past, but also daunting dangers in the ways ahead of Malawi as the track record is not great and it tells a lot about who we are. Breaking away from that will require a courageous transformation,” he said on Wednesday.
The Reserve Bank of Malawi (RBM), however, maintains that the positive macroeconomic outlook envisaged remains firm with annual inflation projected to slow down further to nine percent in 2019 from 9.2 percent in 2018 while gross domestic product (GDP) growth for 2019 is estimated at five percent, an improvement from the growth rate of 4 percent in 2018.
According to RBM data, between April and June 2019, the local unit depreciated by 7.6 percent and traded at K785.2228 per dollar against healthy foreign exchange reserves, the depreciation was primarily driven by speculation amidst perceptions of lower export proceeds.
Meanwhile, the depreciation has largely been contained and the kwacha has recouped some losses and was trading at K763.8595 per dollar by July 22.
At the end of June 2019, total reserves amounted to $1 105.6 million (5.3 months of imports) which was higher than $1 095 million (5.2 months of imports) recorded at the end of June 2018.
Minister of Finance, Economic Planning and Development Joseph Mwanamvekha said on Tuesday that Treasury projects GDP growth of seven percent next year on account of planned infrastructure development and continued focus on growth potential sectors.
He said government’s focus will be to attain inclusive growth, resilient and sustainable economic growth, now that macroeconomic stability has been achieved. “In order for us to achieve our long term goal of poverty reduction for all Malawians, we now need to pursue growth and pro-poor policies guided by our blueprint, the Malawi Growth and Development Strategy [MGDS] III,” he said.
