Goodall insists Malawi economic rebound could emerge this year: Defends mid-term budget

Finance, Economic Planning and Development Minister Gondwe insists that the economy is on a firm path to recovery this year.

The country’s purse keeper said the remarks in his winding up speech of  2016/17 Mid-year Budget Review Report in Parliament.

Gondwe said government is “cautiously optimistic” that an economic recovery could emerge this year.

According to Gondwe, however, the signs of a rebound depend on the extent to which a real recovery can occur depending on how positive the agricultural production will turn out to be.

Gondwe further observed that when an economy which is on a positive growth trajectory, an economic shock such as Malawi experienced, is followed by a sharp growth rate increase.

“This has happened in Malawi at various times in the 70s, 80s and more recently in 1994 and in 2008. When the growth dipped, the follow up growth rate has been more than 9 percent.

“Such growth rates are similar to our circumstances. If this observation repeats itself, it should not be hard to agree with the Reserve Bank of Malawi’s growth rate projection of 5.6 percent and my forecast of at least 6 percent growth rate in 2017. But this is a forecast – it could prove to be wrong, particularly if climatic conditions change and become horribly unfavourable again,” he said.

Gondwe also blamed the previous Peoples Party government, which he served as Economic Planning Minister, of incurring huge stock of arrears which he said will continue to haunt Malawi for the next three years.

The finance minister told the House that on taking over the government in June 2014, it was discovered that Government had accumulated arrears amounting to K155 billion.

He said if the payments of these were to be made from the budget that time, it would have paralysed government operations.

“The sins that were committed three years ago to accumulate arrears during the period ending in June 2014, are going to haunt successive budgets for the next three years,” said Gondwe

He explained that government could not pay the arrears at once nor could they afford to pay even a third of the arrears without jeopardizing the total government operations.

Gondwe  further said that government adopted the suggestion of the IMF to reach understandings with creditors that they should accept zero coupon bonds that could be discounted at commercial banks to allow them to access the liquidity they would require and for the government to carry forward the indebtedness which he said it has gone relatively smoothly.

He has however said that some of the bonds have now matured and should either be paid or they should be rolled over and converted into interest bearing securities.

“We agreed to this arrangement in the hope that at maturity, the economy would have grown and therefore the burden of repayment would be lighter. All these plans make a financial sense,” he said.

In his response to queries made by Budget and Finance committee as well as the party spokespersons on diminishing of development account, Gondwe emphasized that at the time of the preparation of the 2016/17 budget his ministry decided to include even those projects in respect of which financing which he doubted if they can still be included as government is still negotiating for a number of projects.

Finance minister however disclosed that, President has called for a Cabinet meeting to discuss on grants that were not received as expected.

“Economic recovery could emerge this year. There are indeed signs of rebound,” said Gondwe.

Minister of finance also touted a discernable improvement in public finance management reforms that are being pursued by Treasury separately from the Public Sector Reforms Committee headed by Vice-President Saulos Chilima.

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