World Bank verdict on Malawi economy: Recovering
The World Bank says Malawi’s economy is recovering with official figures’ estimates showing an expected growth of 5.7 percent in agriculture and more than 6 percent growth in manufacturing.
The Bank disclosed this on Tuesday evening when its highly powered delegation of more than 10 officials had audience with President Dr. Joyce Banda at Kamuzu Palace in Lilongwe to present the Bank’s overall assessment of the country’s economy over the past 12 months. Leader of the delegation, Kundhavi Kadiresan, who is World Bank Country Director for Malawi, Zambia and Zimbabwe but based in Zambia, said the Bank had been following closely Malawi Government’s efforts towards economic recovery and that it was pleasing to note that there were positive strides.
“We are here to appreciate the progress that your Government has made and to ensure that you stay the course,” Kadiresan told President Banda.
In a presentation titled ‘Malawi: Staying the course and moving faster to recovery’, presented by the Bank’s Lead Economist and Sector Leader (Poverty Reduction and Economic Management), Praveen Kumar, the Bank observed notable progress in a number of areas.
“Interviews with the private sector indicate that in manufacturing, capacity utilization is picking up fast and availability of inputs has improved,” observed Kumar in his presentation.
He further observed that prices were stabilizing although there was anxiety about future seasons.
“Consumer price increases are slowing down and initial adjustment of exchange rate was successful but recently volatile,” said Kumar.
The World Bank Lead Economist attributed the registered success to what he described as politically difficult but sound policies embarked on by Malawi Government.
He noted that reduced reliance on domestic borrowing so far and tight monetary policy were helping prices and exchange rate to stabilize, while interest rates remained high.
The presentation further observed that market-based exchange rate was helping and that in interviews; firms reported that they were regaining competitiveness.
“Almost all foreign exchange now flows through official channels with parallel market premium less than 5 percent, while tobacco has shown a large supply response, partly as a result of market-friendly policies such as contract farming,” said the Bank’s Lead Economist.
The Bank, however, forecast bumpy road ahead but advised government to stay the course nonetheless.
Kumar said regarding the 2013-2014 Budget, there was need for government to stay within the available means, maintain pro-poor expenditure, cut down travel expenditure, and guard against build-up of new domestic arrears.
He further advised government to exercise extreme caution against generating potential new liabilities.
“There is need for better understanding of systematic risks in the banking system and follow-up action,” said Kumar. “There is also need to avoid policy reversals and reduce road blocks to exports.”
In her response, President Dr. Joyce Banda thanked the Bank for remaining Malawi’s true partner in the economic recovery process.
“It is very pleasing that we can sit here this evening with pride and share what we have achieved,” said the President, and she added, “The challenge that lies ahead of us is how to sustain what we have achieved, and achieve even more.”
Accompanying the President at the event were Finance Minister, Dr. Ken Lipenga, Agriculture Minister, Prof. Peter Mwanza, Trade and Industry Minister, Sosten Gwengwe, and Reserve Bank of Malawi Governor, Charles Chuka and some top Government officials.--Malawi News Agency
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