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Ecama cautions government on economic stability

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By William Kumwembe:

CONCERNED—Kalilombe

The Economics Association of Malawi (Ecama), has said the government holds the key to sustaining gains made on the economic landscape by spending within the budget limits among other things.

Ecama President, Chiku Kalilombe, said in an interview yesterday that sustaining registered improvements in key macroeconomic fundamentals would heavily depend on the Treasury’s prudence.

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This comes at a time Parliament starts meeting next week for the mid-year budget review where Finance Minister Goodall Gondwe is billed to give an account of the first six months of the 2018/19 financial year.

Gondwe is also expected to hint on possible revisions to the national budget.

Based on the Treasury reports, some government ministries and departments spent more than 80 percent of their allocated funds by November 2018.

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Kalilombe said addressing challenges associated with the government’s overspending is key towards sustainable sound economic performance.

“For the economy to remain stable, that rests in the hands of the government. We are hoping that the mid-year budget would tackle this,” Kalilombe said.

During the first quarter of 2019, Malawi has registered stability in key macroeconomic fundamentals.

Malawi’s headline inflation, as measured by the Consumer Price Index, went down in January 2019 to 8.8 percent from 9.9 percent registered in December 2018.

Monetary authorities said they expect the headline inflation to hit 9.3 percent in the first quarter of 2019.

In its latest Monetary Policy report, the Reserve Bank of Malawi (RBM) predicted headline inflation to hit nine percent in the second quarter.

The predictions are 0.7 percentage points and 1.0 percentage points lower than what was predicted during the previous Monetary Policy Committee meeting.

The Economist Intelligence Unit recently predicted Malawi’s annual inflation to average 8.9 percent in 2019.

Apart from the drop in inflation, for the first time in 13 months, Malawi saw RBM slashing the policy rate—a key driver of interest rates on loans— from 16 percent to 14.5 percent in February.

RBM also cut by 33 percent the Liquidity Reserve Ratio — a fraction of bank deposits that commercial banks are required to keep at the central bank.

Kalilombe said sustaining the registered trends and investing in continued improvements would be ideal if Malawi is to attain its economic growth ambitions and move into the middle income economies band in the medium to long term.

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