Finance, Economic Planning and Development Minister Goodall Gondwe said on Tuesday government has taken steps aimed at “jump-starting” the Malawi economy which he admitted is not on track.
Gondwe cited recent measures by Reserve Bank of Malawi (RBM) on the foreign exchange market as one of the steps that government has undertaken to help halt the sharp depreciation of the kwacha against major trading currencies.
He also said the new Malawi Social Action Fund (Masaf 4) injection would help ease current economic woes.
Gondwe spoke during the signing ceremony in Lilongwe of a financial agreement worth K40.5 billion between Malawi Government and the World Bank towards Masaf 4.
The minister, who admitted that Malawians are passing through difficult times, also insisted that come next year, Malawians would be “clapping hands” for government having solved the prevailing economic woes then.
Said Gondwe: “We are passing through difficult times, which means that even people below [the poverty line] are even more affected. But we have taken bold steps to jumpstart the economy and I am certain that next year you will be clapping hands to government.”
Business Review sought the minister’s fresh comment on the state of the economy whose key macroeconomic indicators such as inflation and interest rates, public debt and real gross domestic product (GDP) are under severe pressure.
The domestic economy has since July experienced a sharp depreciation of the kwacha, ceding about by 28 percent of its value against the dollar. RBM blamed speculative tendencies for kwacha depreciation, which fueled more inflationary pressure as importers of most basic consumables are passing on the cost of high imports to ordinary consumers.
Headline inflation now stands at 22.2 percent in July from 21.3 percent in June and 19.5 percent in May, triggered by rising food prices on account of a weak currency and the deficit in the staple food, maize which has a weight of 50.2 percent in the Consumer Price Index (CPI)—a basket used by government statisticians to compute inflation figures.
“We felt that we could do something by coming up with a budget by adjusting to circumstances that we are found ourselves in,” said Gondwe.
He bemoaned after effects of the suspension of budget support, following Cashgate as well as January floods and drought, which he said meant that government had to dig deeper into own resources to finance the fiscal gap and resettle the flood victims.
But he downplayed that currently, the exchange rate is not depreciating heavily like the way it was doing last month and attributed that to good measures that have been put in place.