The International Monetary Fund (IMF) Country Representative for Malawi Jack Ree has singled out inflation rate as one of Malawi’s key challenge that is undermining the country’s economic growth. Both Malawi’s headline and annual average inflation have remained stubbornly high in double digit lane since 2012. In this exclusive interview with our reporter JACOB NANKHONYA, he observes that pushing inflation rate further down can help the country harness the economic gains made so far. Excerpts:
How would you describe your confidence in the current government during the time you have been in the country?
I started my tour in August, a time when macroeconomic confidence was on a free fall. Malawi was then also approaching the worst-ever food crisis in its history.
Since then the food crisis was averted. The inflation decelerated from about 25 percent to 14 something percent. The policy focus remained persistently on disciplining the budget, and resolving the monetary excess. Structural reforms were shoveled ahead. As result, confidence is coming back including on the value of kwacha. I think the government deserves a credit for these changes.
On May 5, Minister of Finance, Economic Planning and Development Goodall Gondwe presented to Parliament his Budget Statement in which he made several assumptions all pointing to Malawi economy turning a corner. What do you make of this, is Malawi out of the woods yet?
The minister’s budget statement indeed portrays an uplifting outlook for Malawi’s economy. I have also been saying for some time now that growth is coming back. Therefore, I find the minister’s outlook ambitious yet quite sensible.
To me, Malawi is not out of the woods yet. But it is now seeing the light from outside the tunnel. Before, many believed that Malawi’s economy was stranded. Now, it is clear that it is not.
What would you want to see happening in Malawi on the economic front?
Single digit inflation and an average 5-6 percent growth as the new normal. These would allow Malawi to fly the sky with the rest of Africa.
Do you think the private sector is contributing enough to the economy (job creation, exports etc?)
It has done its part but under an extremely testing environment. Bring down inflation to single digits so interest rates will follow suit. Address supply side bottlenecks. And we will find the private sector on the driver’s seat in Malawi’s aspired journey to the middle-income status.
The World Bank has set the tone for donors by starting to finance Malawi Government budget directly, what does this now mean, are we going to see donors coming back anytime soon?
It is definitely a good news—among others, a vote of trust on the recent macroeconomic gains. However, I would rather not speculate on the prospects of other specific donor programme.
Looking ahead what tips can you give the current government on sustaining the gains made so far?
The authorities just need to stay the course. Stay the course until declaring a clean victory over inflation. Then gradually shift focus to inclusive growth. Keep bringing on reforms and never allow an unwinding of the hard-won gains in them.
Anything you want to add as your last word?
Financial year 2017/18 can open a door to a new trend of robust growth and low inflation. But we need to stay the course. Sometimes, staying the course can be even more difficult than changing it.
Malawi has sustained 3.6 percent average growth during the last five years when inflation was as high as 23.4 percent. During this time, sub-Saharan Africa grew by 3.9 percent with their inflation only at 8.1 percent. Just imagine how much better Malawi can perform when inflation comes down to 5-7 percent. Potential is very clear for Malawi to partake in the ‘Africa rising’ story again.