Govt upbeat on economic recovery in 2012

The tone set by the coming in of the International Monetary Fund mission to Malawi and visit by a delegation from the  Millennium Challenge Corporation has set new hope among senior government officials in a country ravaged by a host of shortages of basic goods.

Malawi’s economy is on its death bed as it mangled by forex unavailability that has seen several crises like fuel shortages instability of both inflation and the local currency, Kwacha.

But a senior member of Office of President and Cabinet (OPC) says there is hope that the coming of the two delegations will restore trust by donors to resume budgetary support that has also greatly contributed to the unavailability of forex in Malawi.

Lipenga: YUpbeat. Photo;Times Group

“We have reached a point of Zimbabwe but with what we discussed with IMF and MCC the problems we are having may be reduced and return to normal during the first quarter of 2012 as we may see return of grants and some countries providing us with budgetary support, ” said the source.

This admission is coming at a time when Malawi government had vigorously argued that it can survive with donor support that led to the passing of the zero-deficit budget which has suffocated business operations with taxes.

On the other hand  Britain has stressed that it neither suspended nor withdrawn its aid programme to Malawi as it only suspended the provision of general budget support to Malawi in July 2011.

US Ambassador in Malawi Jeanine Jackson said her government is interested to ensure that there is respect for human rights and good governance in Malawi with the MCC delegation interested find out progress on dialogue and improvement of economic policy.

Donors, who contribute over 40% of the national budget but influential ones such as the European Union, Germany, African Development Bank, Norway and the World Bank, have also suspended or ended general budget support to Malawi.

Lilongwe attributes the crisis of shortages to have been further compounded by an IMF order that all tobacco proceeds – about 70% of Malawi’s exports – should be deposited to commercial banks, not the reserve bank.

Eventually in June, the IMF said its programme with Malawi was “off-track” as the government had failed to review a $79.4 million credit facility meant to cushion the foreign currency shortages.

The United States development arm, MCC continues to hold back a $350m grant for Malawi’s energy sector based on Malawi government’s handling of human rights, governance and dwindling press freedom space.

Minister of Finance Ken Lipenga told parliament recently that the economic problems will come to an end next year through employment of prudent actions and not shortcuts.

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