|
|
|
|
| Business |
| CDH links elections to economic future |
|
by
Aubrey Mchulu, 19 May 2004
-
18:15:33
|
Financial securities firm Continental Discount House (CDH) has said the direction for the country’s troubled economy will be determined by the manner and style in which today’s general elections will be managed.
In its April economic report sourced from its website, CDH said for May, everything else remaining equal, it is expected that the exchange rate will remain stable and money market rates will not move significantly in either direction at least until the election day.
“But these economic indicators thereafter will depend on several factors including inflows of tobacco dollars, outcome of the general election and the level of donor goodwill arising there-from,” reads the CDH report.
The Malawi kwacha exchange rate against the United States Dollar (USD) continued to maintain relative stability in April 2004, depreciating by less than 0.1 percent from K108.8845 to a US dollar at the beginning of the month to K108.9335 per US dollar at the end of the month.
CDH quotes the Monetary Policy Committee as attributing the stability of the exchange rate to the intervention of Reserve Bank of Malawi (RBM) on the local foreign exchange market.
National inflation, which the National Statistical Office reported to have risen by 0.3 percentage points to 11.1 percent in April, is expected to continue going up in May 2004, according to CDH.
CDH said while pressure on food inflation has eased somewhat following the start of the harvesting season, food stocks are relatively lower this year compared to the previous year hence, accordingly, there is very little chance that inflation may start going down in the immediate term.
“According to monetary authorities, the pressure on national inflation will not ease within the year unless government intervenes in the maize shortage,” says the report.
Commenting on the money market, CDH said the all-inclusive average yields on Malawi Government Treasury and RBM Bills went down to 34.38 percent in April from 34.43 percent the previous month.
The drop is said to have mainly originated from Malawi Government Treasury Bills (TB) average yields, which declined by 0.29 percentage points from 34.67 percent in March to 34.38 percent in April while RBM Bill average yields dropped marginally by 0.02 percentage points from 34.18 percent in March to 34.16 percent in April.
But, according to CDH, a review of the fundamentals does not support the current downward movement in both TB and RBM Bill yields because, for example, the slow down in donor funding has obviously had a negative impact on the government budget, thereby increasing government’s appetite to borrow from the public through TBs.
“This in turn exerts pressure on TB and RBM Bill yields. Again the [May 20] general election requires heavy public expenditure, which would exacerbate governments’ appetite to borrow and obviously this would suggest that TB and RBM Bill rates would have been going up as opposed to going down,” said CDH.
This observation comes amid earlier fears from some analysts that most of the indicators such as interest and inflation rates could be manipulated to avoid unpopular reactions in view of the election.
|
| |
|
|
|
|
|
