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Stick to revised budget, IMF tells Malawi government

The International Monetary Fund (IMF) has urged Malawi government to stick to the revised budget ahead of the mid-year budget review.

Capital Hill is currently working on revising the budget downwards to match with the available resources.

IMF resident representative Geoffrey Oestreicher said the current inflation rate has drained the private sector of the will to invest, and consumption is weakening as inflation has eroded real incomes.

He said the medium to long term solution of addressing the current economic woes is to get rid of the inflation.

“Specifically, we need strict adherence to the revised budget that limits the amount of domestic borrowing. This needs to be combined with a tight monetary policy that maintains positive real interest rates.

“This will increase the attractiveness of the kwacha as an investment currency and will strengthen the exchange rate as more people trade foreign for domestic currency to take advantage of these opportunities,” said Oestreicher.

He further said over the medium term, structural reforms in other areas, such as to improve the business climate, improve infrastructure, education and health will be needed to sustain high growth.

“But macroeconomic stabilisation is the key to turning the economy around in the short term, and it is also an essential precondition for these other structural reforms to have their intended effect,” said Oestreischer.

Last week, presidential advisor on economic affairs Collins Magalasi said government is working towards finalizing the budget review.

He said the review is expected to be complete within the next two weeks.

According to highly placed sources, the revised budget is expected to be in tandem with the local revenue collection.

The sources said there are expectations that the budget will go down to somewhere around K700 billion because that is the current target for the Malawi Revenue Authority (MRA).

“With the absence of budgetary support, our operations rely on the local resources. So, we have to work with the money that we have and this means cutting expenditure where necessary,” said the source.

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