Malawi Pesident Peter Mutharika has told parliament that he is overseeing economic boom that will soon transalate to a full circle of economic recovery for the country to achieve sustained inclusive growth and development.
The President told the House that the “sound macroeconomic policies” that his government has been implementing in the 2014/2015 financial year “have already started bearing positive results.”
He said the economy is projected to register a real GDP growth of 5.4 percent in 2015, despite setbacks such as recent floods and dry spells that have affected agricultural production.
“Going forward in 2016, the economy is projected to rebound with a strong growth of 6.5 percent,” Mutharika said.
Mutharika was speaking when he delivered a State of the Nation Address during the opening of the Budget Session of Parliament on Tuesday in the capital Lilongwe.
The Malawi leader said his administration will continue to design and implement sound macroeconomic policy reforms aimed at creating a stable macroeconomic environment for the private sector to thrive, with a view to transforming the economy to attain full recovery .
“ Fiscal and monetary policies will, therefore, seek to ensure that annual inflation remains low, stable and within single digits; reduce and eventually eliminate huge domestic borrowing; reduce balance-of-payments deficits; maintain a stable exchange rate; and achieve and maintain lower interest rates. The policies will ensure that the economy achieves and maintains high economic growth rates of at least 6 percent,” said Mutharika.
The Malawi leader pointed out that although the country’s current foreign exchange reserves “still remain lower than adequate” the foreign exchange reserves have” risen to more than 3 months of import cover.”
He said the increase in foreign exchange reserves has managed to “anchor the stability of the Kwacha” in 2015.
“Mr. Speaker, Sir, it is expected that foreign exchange reserves would continue to rise with the onset of the tobacco marketing season and the resumption of the International Monetary Fund (IMF) programme,” Mutharika said.
Mutharika said the economic boom is set to continue with annual average inflation expected to drop from 23.8 percent in 2014 to 16.4 percent in 2015.
“This is due to the combined effect of the stable exchange rate and a significant decline in global oil prices. It is projected that inflation will continue to be on a downward trend and will reach an annual average rate of 12 percent in 2016,” said Mutharika.
The President also informed parliament that his government successfully concluded negotiations with the International Monetary Fund (IMF) on the Extended Credit Facility (ECF) for the Fifth and sixth reviews in March, 2015.
“This resulted in the IMF’s approval of the completion of the Fifth and sixth reviews of Malawi’s economic performance under the programme supported by the ECF arrangement, as well as financing amounting to US$18.1 million for immediate disbursement.
“Mr. Speaker, Sir, the successful conclusion of the reviews and approval of the disbursements is expected to trigger disbursements from all other development partners, since this signals Government’s commitment to the macroeconomic programme,” the Head of State said in his address.
Mutharika said following the “cash-gate” corruption scandal, the contribution of donor support to the budget substantially declined from about 30 percent of the total resource envelope to less than 20 percent in the 2014/2015 fiscal year, saying the 2014/2015 budget has been largely financed by domestic resources.
He said in order to fill the revenue gap created by the deficit in donor financing, the Mutharika government intensified implementation of tax policy reforms aimed at improving the tax regime to reduce loopholes and improve on tax compliance and investor confidence.
Government, said Mutharika, has also embarked on a comprehensive review of the various tax legislations in order to improve on tax administration and encourage investment in the country, a process Mutharika said he expected to be completed by the end of the 2015/2016 fiscal year.
- Read Mutharika full address here: State of the Nation Address