IMF insists on sustained tight economic policies in Malawi

The International Monetary Fund (IMF) has reiterated to Malawi that policy continuity is critical for curbing inflation and for a sustained recovery despite increasing calls from the civil services and NGOs for government to manage economic hardships on the citizenry by raising wages and minimizing tax burdens on the citizenry.

In its May 2013 Malawi report, the IMF said it placed much weight and emphasis to the country’s authorities on continuity of tight economic policies is critical for curbing inflation and for a sustained recovery.

“Policy discussions focused on measures to maintain a tight monetary policy until inflation pressures recede, and on the need for fiscal restraint to contain aggregate demand in order to stabilize the exchange rate and begin to accumulate international reserves.

“Risks to the program include adverse weather conditions and policy reversals in the lead up to the 2014 general elections. Policy reversals would jeopardize the prospects for recovery and sustained growth,” the IMF said.

President Banda backed by IMF to conitnue with  tight economic policies
President Banda backed by IMF to conitnue with tight economic policies

The Bretton Woods institution noted that policy reforms in the economy are yielding positive results as there is increased availability of foreign exchange—including through the re-establishment of external credit lines—has regularized the supply of fuel and allowed increased imports of inputs for production.

“The authorities remain committed to the policy reforms they have been implementing since May 2012. Notwithstanding growing public complaints and protests about the rising cost of living, the authorities reiterated their commitment to stay the course of policy reforms to the Managing Director of the Fund when she visited Malawi in early January 2013.

“While they have made concessions in response to political and social pressures, the cornerstones of the reforms—the market based exchange rate regime and automatic adjustment mechanism for fuel prices—have remained unchanged,” IMF said.

Currently civil servants are calling for wage increase to counter the ever rising cost of living while faith based group, Centre for Social Concern says it is high time government minimizes tax burdens for Malawians to get relief on their incomes which most of the times is inadequate.

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