Finance Minister Maxwell Mkwezalamba has contradicted the country’s major donors under the Common Approach to Budget Support (Cabs) on the state of Malawi’s current macroeconomic situation.
While Mkwezalamba believes the macroeconomic situation characterised by high interest and inflation rates is fast stabilising, the donors insist the economy “remains very fragile”.
The different view points on the economy’s status were evident during a joint Malawi Government and Cabs review meeting in Lilongwe last week.
“The macroeconomic situation is fast stabilising as evidenced from falling inflation and interest rates and restoration of some stability in the exchange rate,” said the finance minister.
He said implementation of prudent fiscal and tight monetary policies, particularly after revelations of the looting of public financial resources at Capital Hill known as Cashgate, “has started reaping dividends”.
Mkwezalamba also said the economic growth performance has also been more satisfactory.
Last Monday, President Joyce Banda said government has revised upwards the 2013 real gross domestic product (GDP) growth rate from 5.4 percent as of September 2013 to 6.1 percent buoyed by increased production of cash crops and the availability of foreign exchange and fuel.
“Moving forward, we aim to restore macroeconomic stability in line with the government objective,” said Mkwezalamba, observing that restoring and maintaining macroeconomic stability will, however, depend on how the country commits to deliver on its partnership.
On the contrary, Cabs co-chairperson Alexander Baum, who is also Head of the European Union (EU) Delegation, described the environment in which the review was taking place as continuing to be difficult.
He emphasised that the economic recovery remains fragile, saying the challenges to public finance management and the follow up to the Cashgate are ongoing while national and local elections are fast approaching.
Said Baum: “Exchange rate liberalisation, a restrictive monetary and fiscal policy, while inflicting costs in terms of increased inflation and pressure on social spending, has resulted in a fairly rapid reversal of the previous macroeconomic decline.”