The Economics Association of Malawi (Ecama) has asked government to exercise fiscal discipline if a quick turnaround of the economy is to be achieved.
Government is implementing a number of economic reforms, which include the devaluation of the kwacha and automatic fuel pricing mechanism (APM), to resuscitate Malawi’s ailing economy.
But in a statement released last week, Ecama says the success of the reforms hinges on each stakeholder such as government, the private sector and the public playing their key roles.
“Until inflation and exchange rate stabilises, the authorities should exercise fiscal discipline, especially in 2013 which is a campaign year, and maintain the market-oriented economic reforms such as a floated currency, automatic fuel pricing system and allow non interference in the determination of utility prices.
“Important to fiscal discipline is also the need to ensure that foreign debt remains within sustainable levels as is currently the case while minimising recourse to domestic debt as much as possible,” reads the statement in part.
The statement says the economy is on its path to recovery as evidenced by a deceleration in the inflation and stabilisation of the exchange rate which Ecama says is a sign that the currency is finding its equilibrium position.
“Inflation while increasing and very high it has been decelerating since May 2012 likely due the economic reforms undertaken which includes aligning money growth to waning domestic production by reducing its expansion,” says Ecama.
Since the implementation of the economic reforms, the Malawi economy experienced a worrisome performance with the November inflation hovering at 33.3 percent up from 17.3 percent in May last year.
GDP growth rate was also adjusted downwards from an initial 4.3 percent to a meager 1.9 percent in 2012 while the kwacha tumbled on a free fall by a margin of more than 100 percent since May 2012.
Ecama joins the International Monetary Fund (IMF) and Malawi Confederation of Chambers of Commerce and Industry (MCCCI) that have also asked government not to abandon the reforms.