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Watch out for weather related shocks—IMF

The International Monetary Fund (IMF) has advised government to build resilience against weather-related shocks and improve its agricultural productivity saying the macroeconomic outlook remains challenging.

In a country report released on Wednesday, the IMF said due to uncertainties related to weather conditions there is need to maintain tight fiscal and monetary policies to entrench the recently attained macroeconomic stability.

Flashback: A family waits outside their home for relief teams in Chikwawa, during the January 2015 floods

In the analysis the IMF said the recent episodes of two consecutive droughts should call for the much-needed infrastructure investment in the agriculture sector to improve irrigation and enhance productivity.

Reads the report in part: “Given Malawi’s increasing debt vulnerability, the government should prioritise these projects and ensure that borrowing be concessional. Parallel efforts are needed to re-engage donors in project financing and enhance private sector investment by improving the business environment.”

According to the IMF medium-term projections are predicated on a policy mix to reduce inflation, the normalisation of weather conditions, and on the authorities’ commitment to address key supply-side bottlenecks such as electricity, water, and feeder roads.

On the other hand, the fund said real gross domestic product (GDP) growth is projected to pick up to 4.5 percent in 2017, rising to the 5.5 percent range over the medium-term, due to recovery in the agricultural, construction, and the wholesale and retail sectors.

The Bretton Wood institution also said the implementation of structural reforms to enhance electricity supply, remove agricultural market distortions, and greater diversification is expected to support growth over the medium-term.

IMF’s sentiments should auger well with Minister of Finance, Economic Planning and Development Goodall Gondwe, who is upbeat that the strong fiscal and monetary policies being implemented in the aftermath of Cashgate and being reinforced by the institution’s Extended Credit Facility (ECF) programme, will sustain the recovery into 2018.

However, Gondwe recently admitted that “government ought to do a lot more regarding the systematic compliance by the fiscal system to the country’s financial rules and regulations”. 

 

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