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Firm outlines key economic threats

Investment management and advisory firm, Nico Assets Managers, has outlined key risks that would distrust Malawi’s economic development endeavors.

The firm, in it’s January, 2016 economic brief, has identified adverse weather effects, increased government expenditure, high debt levels, banking sector risks, and delay in food assistance and implementation of Fisp as likely risks to the economy in the short to medium term.

These, according to the firm, could have an adverse impact on the economic growth strides for the country this year.

The firm says the increased expenditure in the government budget, especially from an increasing wage bill will lead to an increase in government borrowing hence widening the fiscal deficit.

It warns that government expenditure may further increase if agricultural production will be below the required amount.

“High debt levels would (therefore) create a future obligation for government to repay the debt plus interest.

Long term debt results in higher levels of interest payments which increases government expenditure and increases the budget deficit,” reads the statement in part.

On the banking sector risk, Nico Asset managers said high lending rates may lead to slow down in private sector growth and a decrease in capital investments.

“High lending rates may also lead to high default rates on loan facilities and lower private sector activity,” says the firm.

To date, lending rates in Malawi have remained high in comparison with other Sadc countries hovering around 40 percent.

This, according to economic commentators, would continue to deter private sector growth in the country while inducing pressure on the doing business environment.

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