Malawi should see economic growth pick up to 5.1 percent from about 3.1 percent, Finance Minister Goodall Gondwe told parliament citing International Monetary Fund (IMF) as an authority for such projections.
He said the country has been affected by drought caused by the El Nino weather pattern.
“Mr Speaker, Sir, as projected by the IMF, the Malawi economy is expected to rebound from the real GDP growth rate of 3.1 percent in 2016 to 5.1 percent in 2016.,” said Gondwe.
“Although the economy has been depressed by the El Nino weather episode which particularly adversely affected smallholder agricultural production, commercial agriculture has registered an increase,” the Finance Minister stated when he presented a national budget statement on Friday in the capital Lilongwe.
Agriculture accounts for almost a third of Malawi’s economy and provides the livelihood of 80 percent of the population. Last year, the country suffered floods, then a drought that has hit production of the maize crop across southern Africa.
In his budget statement, Gondwe said growth in 2016 has also been anchored by a good performance in the services sectors notably, the wholesale and retail trade sector, the information and communication sector, and the financial and insurance services sector.
He disclosed that Malawi’s inflation has decelerated to 20.9 percent in April 2016.
Gondwe said were it not for the adverse climatic episodes, the economy of Malawi would have performed much better.
“Instead. Malawi’s real GDP growth slowed down substantially from the rate of 6.2 percent registered in 2014 to 3.1 percent in 2015 due to the erratic weather conditions that disrupted the 2015 harvest.
“The undesirable performance in the agricultural sector, which declined by 1.6 percent last year, adversely affected the performance of other sectors of the economy, including wholesale and retail trade as well as manufacturing,” said Gondwe.
However, he said Malawi’s economic growth of 3.1 in 2015 10 percent compares favourably with those of most countries in the SADC and COMESA regions.
“For instance, South Africa and Zimbabwe only grew by 1.3 percent and 1.5 percent, respectively. 14. As a result of the slow growth, unstable macroeconomic conditions persisted in 2015, despite showing signs of improvement relative to 2014.
“The annual average inflation rate for 2015 was at 21.8 percent, down from 23.8 per cent in 2014. This reflected the combined effect of food scarcity, a higher level of liquidity in the economy, as well as the unexpected depreciation of the exchange rate during the tobacco season,” Gondwe stated.
He said said the weakening of the Malawi kwacha against major trading currencies was occasioned by a general strengthening of the US dollar and speculation among currency traders on the local market.
“The Kwacha depreciated from K450 per US dollar in February 2015, to K765 per dollar a year later,” he said.
Gondwe said domestic currency depreciation was worse in other countries, including some within the region.
“ For instance, the Zambia 11 Kwacha depreciated by almost 90 percent between February 2015 and February 2016. The South African Rand also depreciated from ZAR11.63 to ZAR15.76 during the same period,” he said.
Finance Minister said the economic slowdown in 2015 also had a negative impact on the national budget.
“At midyear, for instance, domestic revenue underperformed by 4.1 percent against the target of K312.4 billion,” he said, pointing out that underperformance in revenue collection also reflects weaknesses in the tax administration system which he said “ must be addressed.”
Malawi is also grappling with a loss of donor funds to support its budget in the wake of a scandal christened as “cashgate”.
A forensic audit report by British firm, Baker Tilly established that K24 billionwas looted from Capital Hill between April and September 2013 under the administration of Joyce Banda and her People’s Party (PP).
The Democratic Progressive Party (DPP) and PP led government let the potential looting of K577 billion (about $856 million) in public funds between January 1 2009 and December 31 2014, roughly a third of what government spent during the period , according to PricewaterhouseCoopers’ (PwC) data analysis report.
There is a general feeling that the DPP administration is suffocating the investigations ostensibly because part of the potential mismanagement may have happened on their watch with the late Bingu wa Mutharika as president.Follow and Subscribe Nyasa TV :