Malawi will see its economy grow by 4.3 percent this year in its recovery programme, Finance Minister Ken Lipenga told parliament in the capital Lilongwe on Friday.
The economy is expected to accelerate to 5.7 percent next year, Lipenga said in a budget speech.
Lipenga said government has set out economic reforms including liberalizing Malawi’s foreign exchange regime and the removal of price controls on fuel and utilities.
“The removal of price controls is necessary to move to a market based economy and to reduce the burden of subsidies on the Budget,” he said.
“Other key anchors include No Net Domestic Financing, careful expenditure control and prioritization together with the implementation of reforms to strengthen governance systems for public financial management.”
Lipenga informed that Malawi will record a budget deficit of 13.5 billion kwacha ($50 million) with total revenue, including grants, rising 20 percent to 394.5 billion kwacha in the year through June 2013.
The deficit will be entirely financed from foreign grants and loans, “reflecting our main fiscal anchor of no net domestic financing,” Lipenga said.
He also announced the removal of price controls and subsidies on fuel and utilities.
“This is an austerity budget and some of the reforms will be painful. But these are required to put the economy onto a path of sustainable growth,” Lipenga said.
He said t is clear that the economic reforms which have already been implemented are beginning to bear fruit.
Lipenga said the devaluation of the Malawi Kwacha by the Reserve Bank of Malawi and the implementation of a market determined exchange rate “have restored credibility” to the country’s monetary policy environment.
“It has also provided the policy environment to ensure that foreign exchange transactions return to the formal financial system from the parallel market,” he said.Follow and Subscribe Nyasa TV :