Standard Bank upbeat on economic recovery
Standard Bank plc chief executive Phillip Madinga says the 2022/23 National Budget can stimulate full economic recovery from the Covid-19 pandemic, but government needs to restore donor confidence and win back a full IMF programme for the budget to succeed.
He said in an interview yesterday that getting the country back on track with International Monetary Fund (IMF) and restoring donor confidence is critical in stabilising the country’s current precarious foreign currency reserves position.
Madinga said: “We need urgent and impactful actions to address current forex shortages and we believe the budget is setting that tone.
“Restoring donor confidence and getting an IMF programme fully back on track will be critical in obtaining stability in the markets.”
Tabling his maiden K2.8 trillion budget last Friday, Minister of Finance and Economic Affairs Sosten Gwengwe admitted that the country was sitting on “worryingly low levels” of forex reserves, which pushed inflation as demand for imports surged at a time most economies are recovering from the Covid-19 pandemic.
Madinga said growth of the economy from 0.8 percent in 2020 to 3.9 percent in 2021 reflected a return to normality amid the pandemic, but was nothing extraordinary.
Throwing caution, the seasoned banker and economist noted that while achieving the budget’s average gross domestic product (GDP) growth target of 4.1 percent looks possible, the assumption of a low interest rate regime as wished by the government is a litmus test on its own ability to manage macro-economic fundamentals.
“As much as the economic goals we have set around infrastructure development, food security and others would be best delivered in a low interest rate environment, it is detrimental to force the market to give low interest rates while the determinants are off-track,” said Madinga.
While commending Gwengwe’s push on managers of donor-funded projects to fast-track their work for more foreign funds to flow into the projects and release forex, Madinga urged government to restore donor confidence.
The 2022/23 proposed budget has an estimated deficit of K884 billion or 7.7 percent of GDP, 0.3 percentage points lower than that of 2020/21 budget as government preaches about cutting down on expenditures and borrowing.
At its December 13 2021 meeting in Washington DC, USA, the IMF executive said Malawi’s debt situation is unsustainable and requires to be restructured while authorities maintain a lid on unnecessary expenditure. Malawi’s total public debt stock was recorded at K5.5 trillion as of June 2021, according to Treasury figures.
