Minister of Finance Goodall Gondwe Government has said Malawi is on course to achieve single digit inflation next year.
The country’s inflation is currently at 14.6% following an average of 21.8 percent in 2016 and Gondwe is optimistic that the rate will continue to subside in the next 12 months.
Speaking in Parliament when presenting the 2016/17 national budget on Friday, Gondwe said the strong fiscal and monetary policies the International Monetary Fund (IMF) told Malawi to implement have sustained the recovery which is continuing into 2017.
“[The recovery] is strongly expected to continue to gather strength in 2018, when it is projected that single digit inflation that has been unsuccessfully pursued for the past seven years could prevail,” said Gondwe.
Gondwe said the downward trajectory of both food and non-food inflation led the Reserve Bank of Malawi (RBM) to reduce its policy rate to 22 percent in March this year from 27 percent at its peak.
The minister hoped that with a continuation of this trend in inflation, RBM will reduce the policy rate further and generate a continued fall of rates of interest leading to improved access to credit by the private sector.
He added that sustaining the favourable economic environment could provide the linchpin of a needed robust growth since a number of companies are already considering to expand production and increase the recruitment of labour because of the vast improvement in the availability of forex and the expectation of further interest rate reduction.
In 2015 and 2016 Malawi had poor crop harvests due to drought and floods experienced in many parts of Malawi. This reduced growth in such sectors as manufacturing, energy and water supply but the economy began to recover late last year.
This year, the economy is expected to register an increased growth rate of 5 to 6 percent.
The minister however warned that a lot has to be done to perfect economic management in Malawi saying careless use of resources can reverse the gains made so far. He also noted that government need to do more to adopt basic sound fiscal management practices as needed to routinize bank reconciliations.
“As the recent forensic audits have shown, lack of systematic reconciliations have resulted in inexplicable use of huge amount of resources. It is therefore, imperative that on completion of the current audit by independent auditors regarding the remaining K236 billion, further transparency of our fiscal system, must be routinized,” said Gondwe.