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| IMF wants inflation, GDP targets revised |
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by
Tadala Makata Kakwesa, 08 March 2005
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14:18:43
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The International Monetary Fund (IMF) has asked Malawi to revise her inflation and economic growth estimates to reflect the impact of the poor harvest.
The IMF said this in Lilongwe during a press briefing it held to report on the outcome of the Staff Monitored Programme (SMP) mid-year review.
“There are uncertainties related to the impact of the recent dry spell on agricultural output and on the budget,” said the Fund.
Official estimates published mid last month said Malawi would harvest 1.7 million tonnes of maize against an annual requirement of 2.4 million.
But the authorities now say that the estimate may have been overestimated by 40 percent—meaning that the situation is more serious than painted by earlier estimates.
Government says it will import 40,000 metric tonnes of maize from South Africa.
This means that millions of SA rand—the most sought currency in Malawi and the Sadc region—will be shipped out of the country.
The food index—dominated by maize—controls about 60 percent of the Consumer Price Index, making it Malawi’s most important inflation driver.
The staple food crop also has the muscle to frustrate the objectives of the national budget economic growth, exchange rate and interest rates.
Inflation closed year 2004 at 11.5 percent but government hopes the general rise in prices will hit 10 percent by December this year.
Malawi expected a 3.7 percent GDP growth for 2004 and 4.2 percent for 2005.
“These projections may need to be revised to reflect the implications of the dry spell,” said the Fund.
The team advised the Ministry of Finance and the Reserve Bank of Malawi to control spending, lower money supply and in the process, tame inflation.
It, however, welcomed the progress made under the SMP and hailed Malawi’s sound macroeconomic policies especially those aimed at arresting debt accumulation.
The Fund was encouraged by the new government’s commitment to enforce stricter public expenditure because “unbudgeted expenditures were the cause of a worsening macroeconomic situation in recent years.”
“The government’s efforts on zero-tolerance for corruption is very important. The achievements made in both of these areas in a short time are impressive and are already providing economic and social benefits” said the IMF.
During the IMF mission in July 2004, the government of Malawi requested an SMP in support of the government’s efforts to rebuild its track record of economic policy implementation.
The programme aims to address macroeconomic imbalances by containing government borrowing and holding down inflationary pressures.
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