Goodall schools Malawi on macroeconomic stability

Malawi’s former finance Minister Goodall Gondwe has tipped the Joyce Banda administration on how to attain macroeconomic stability and, consequently, fully recover the ailing economy.

Gondwe, who is highly accredited for maintaining low and stable macroeconomic indicators during late president Bingu wa Mutharika regime, thinks that anchoring adequate foreign exchange reserves, slowing down inflation rate and achieving an equilibrium exchange rate are key for the domestic economy to experience macroeconomic stability.

The former International Monetary Fund (IMF) official offered the advice at Nkopola Lodge in Mangochi during the 2012 annual Economics Association of Malawi (Ecama) annual conference, where he was one of the key discussants.

“We hope we will rest at a stable exchange rate and, therefore, once that macroeconomic stability is achieved, you have reached a conducive economic environment,” said Gondwe.

His tip comes when the Malawi economy continues to be pinched by a double-digit headline inflation rate, high cost of borrowing, a dramatic depreciation of the kwacha and a projected slowdown in economic activity which many believe is a consequence of recently implemented economic reforms by the ruling administration.

The land-locked agro-based economy, has seen the price of one dollar to kwacha swiftly tumbling from K167 mid-May to around K320, as of last week, with headline inflation rate settling to a record high of 28.3 percent as of September, a rate which is one of the highest in southern Africa.

Such a dent in the economy’s macroeconomic atmosphere has since prompted government to launch an Economic Recovery Plan (ERP) which has outlined immediate, short-term and medium-term policy reforms aimed at cooling down key macroeconomic indicators.

Gondwe told the gathering of economists, diplomats, bankers and other policy makers that the effective implementation of twin-policies of fiscal and monetary policies will be key for Malawi to achieve macroeconomic stability.

Commenting on the fiscal policy side, he observed that at the moment, there are too many players or ministries that seem to be implementing the fiscal policy, something, he said, distorts effective implementation of the policy.

Gondwe said over the years the Ministry of Finance has had challenges in executing its supervisory role over other sectoral ministries which has compromised the implementation of the fiscal policy.