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Malawi donors see improved economy in 2013

Malawi’s key economic donors, under the Common Approach to Budget Support (Cabs), have said they expect a quick rebound in the domestic economy backed by improved foreign exchange availability and the elimination of the exchange rate misalignment, among others.

“Economic growth is expected to rebound owing to the elimination of the exchange rate misalignment and the increased availability of foreign exchange, including through the re-establishment of external credit lines,” said Cabs co-chairperson Peter Woeste who is also German Ambassador.

Woeste was speaking in the capital, Lilongwe during a second Cabs review meeting which primarily focused on the outturn for the 2011/12 National Budget, the budget performance and the outturn for the first half of the 2012/13 fiscal year and the outlook and priorities for the financial year 2013/14 budget.

Malawi receives a harmonised general budget support from a group of donors comprising the United Kingdom (UK), Norway, the African Development Bank (AfDB), the European Union (EU), the World Bank and Germany.

The International Monetary Fund (IMF) and United Nations Development Programme (UNDP) also participate as private observers.

Woeste’s projection comes on the back of a forecast by IMF which has also indicated that it expects a strong rebound in the performance of the Malawi economy this year, “assuming strong policy commitment and normal weather conditions.”

He said there are good prospects of a favourable harvest of maize, tobacco and other cash crops this year in the wake of adequate rains.

Commenting on the reforms that President Joyce Banda administration is implementing, the German Ambassador stressed that the decision by government to devalue and float the currency last year was difficult but necessary, if Malawi was to have any hope of regaining economic stability.

He also described the decision by government to introduce the automatic pricing mechanism (APM) for fuel as courageous.

“I remember hearing a leading politician just a couple of days ago on Zodiak Radio, saying the litre of petrol was only K390 then and he claimed that things were better than today’s K700. Yes, but I wasn’t able to get any fuel at the low price and neither could the other 500 drivers queuing in the same line for days. Fuel is much more widely available now,” he said.

He also applauded government for its handling of the humanitarian situation at the time when cushioning of hardships of the economic reforms ‘was paramount.’

Woeste encouraged Malawi Government to strive for a balance of efforts towards short-term growth as outlined in the Economic Recovery Plan (ERP) and investments in areas of health and education for a long-term growth on one hand.

But he warned that ‘the battle is not yet won,’ saying government needs to continue tightening both fiscal and monetary policy in order to bring down inflation and restore macroeconomic stability.

Finance Minister Ken Lipenga also painted a rosy picture on the performance of the economy, saying government expects a robust agricultural production this year.

“The economy is expected to perform better in 2013 on account of a good agricultural production as well as a stable macroeconomic environment,” said Lipenga.

According to the IMF projection, Malawi is poised to grow by 5.5 percent this year which is double the growth rate of 1.9 percent estimated in 2012. 

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