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Economic instability bothers expert

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Local economist Betchani Tchereni has warned that chances for sustainable economic growth would, in the medium term, remain stifled by level of instability in key macroeconomic fundamentals and other factors.

Tchereni, an economics professor at the Malawi University of Business and Applied Sciences, last week said, as the economy continues facing myriad challenges, planning for businesses and at other levels remains difficult.

Apart from pangs of the Covid pandemic, coupled with effects of the Russo-Ukrainian war, the local economy has been facing challenges including forex and fuel scarcity, elevated cost of living, fiscal space pressure and power woes which are already affecting growth strides.

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These have shaken key macroeconomic fundamentals including annual inflation target which is almost missed already.

The local unit, the Kwacha, has not been stable due to, among other factors, prevailing mismatches between forex demand and supply on the market, which has also further affected the Balance of Payment position.

Also, the cost of borrowing in the country remains elevated with the policy rate—the rate at which commercial banks borrow from the Reserve Bank of Malawi as lender of last resort—recently adjusted upwards from 12 percent to 14 percent.

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Further, the fiscal space has been affected as government expenditure has continually been outweighing the revenue, thereby creating a glaring deficit which has only been covered by public borrowing.

Already, the International Monetary Fund has slashed Malawi’s gross domestic product (GDP) growth prospects for 2022 from 2.7 percent in April to 0.9 percent.

This means attaining the lower middle income economy status which the country so much desires by 2030, according to the First 10-year Malawi Implementation Plan, remains far-fetched as, to do so, Malawi needs to grow its economy by at least six percent each year.

According to Tchereni, institutions like the RBM should work through policy interventions to ensure stability at all levels.

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