Bloomberg News

Malawi Needs Fiscal Tightening, Finance Minister Says

January 02, 2013

Malawi’s economy needs more fiscal and monetary policy tightening in order to stabilize the currency and curb inflation, Finance Minister Ken Lipenga said.

The kwacha’s devaluation and deregulation of fuel prices last year have started to benefit the economy, Lipenga said in a statement published today in the Daily Times newspaper. Growth in money supply eased to 18 percent in November from 35 percent in April, he said.

Since the currency was devalued by a third in May, it’s slumped 26 percent against the dollar, making it the worst- performing unit in Africa. That’s boosted inflation in the southern African nation to 33 percent in November from 30.6 percent in the previous month and prompted the central bank to raise its benchmark interest rate by 4 percentage points to 25 percent on Dec. 4.

The resumption of donor aid to Malawi and higher export proceeds from tobacco have helped the government boost foreign currency reserves, Lipenga said. Government borrowing from banks declined by 18 billion kwacha ($55 million) since April, while private-sector lending increased by 17 billion kwacha, he said.

Consumer groups are planning nationwide protests on Jan. 17 against soaring costs and to force the government to reverse the currency devaluation.

To contact the reporter on this story: Frank Jomo in Blantyre at fjomo@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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