Malawi President Joyce Banda sounded optimistic in her speech delivered during the Mozambique-Malawi business forum at the Bingu International Conference Centre in the capital, Lilongwe, that the prevailing high inflation and lending rates will start falling in the second half of the year.
Banda made the assurance amid a general outcry of the skyrocketing headline inflation rate and lending rates among commercial banks, triggered by the implementation of a reform programme by her government since she took over leadership in April last year.
Said the President: “We are aware of the challenges such as, high inflation rate and interest rate, but they will start falling in the second half of the year.”
She was speaking at the business forum where the Mozambican president Amando Guebuza was also in attendance.
But the President’s statement could raise eyebrows among economic analysts as it comes at a time when authorities are grappling to contain both interest rates and inflation rates, which are among key macroeconomic variables.
Year-on-year headline inflation for the month of February currently stands at 37.9 percent which presents a 2.8 percentage point higher than that recorded in the month of January 2013, backed by recent adjustment in the prices of maize and maize flour and also the adjustment in the price of fuel.
Borrowers are currently reeling from high interest rates charged by commercial banks as a result of Reserve Bank of Malawi (RBM) increase of base lending rates. Current base lending rate dictated by RBM stands at 25 percent from 13 percent at the beginning of last year.
Recently, commercial banks have started to unilaterally hike their respective lending rates even without an official hike in the base lending rate by RBM.
However, Banda’s optimism is based on the premise that the Economic Recovery Plan (ERP) has now ‘started bearing fruit,’ but acknowledged that Malawians are still suffering from the impacts of the reforms.
“Desperation for foreign exchange is going down and the difference between the official and parallel rates has been reduced from eighty to five percent. Investors are back and productivity is picking up,” said Banda.
President Banda, however, urged both Malawi and Mozambique business captains to scale up their trade volume and maximise business opportunities between the two countries. .
On his part, Gebuza also noted that there are plenty of trade opportunities between Malawi and Mozambique, adding that the relationship between the two is growing from strength to strength.
The two governments have signed four cooperating agreements that include, a power interconnection project that caters for the tapping of more power and extension of lines from Mozambique.