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Worry over fiscal discipline as 2019 elections approach

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The African Development Bank (AfDB) has said it sees mounting pressure on fiscal spending as Malawi heads towards the 2019 elections.

In its Africa Economic Outlook for 2018 released recently, the AfDB said the increased fiscal spending would come about as the current administration strengthens efforts to win re-election.

Malawi will go to the polls in May 2019 to elect a new leader to propel the economy to prosperity up to May 2024.

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Analysts have predicted a neck-to-neck contest between the incumbent President, Peter Mutharika of the ruling Democratic Progressive Party (DPP) and main opposition Malawi Congress Party (MCP) leader, Lazarus Chakwera.

The Economist Intelligence Unit (EIU) has also predicted that political pressure to protect subsidies and public-sector workers’ wages will also keep recurrent and overall spending high before the 2019 election.

EIU said Malawi’s fiscal deficit is expected to contract from 3.7 percent of Gross Domestic Product (GDP) in the 2016/17 Fiscal Year to 3.2 percent of GDP in 2018/19 Financial Year.

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In its 2017 Economic Report, Nico Asset Managers said an increase in expenditure will result in improved livelihoods as the vulnerable are cushioned from the negative effects of the policy reforms.

Nico further said a large fiscal deficit may lead to higher government domestic borrowing, which in turn leads to higher interest rates as the liquidity in the market decreases.

As at the end of the third quarter of 2017, Malawi’s domestic debt stood at K912.9 billion, a 7.3 percent increase from K846.1 billion recorded in the second quarter.

Speaking when he launched the outlook, AfDB President, Akinwumi Adesina, made a compelling case for accelerating Africa’s industrialisation to create jobs, reduce poverty and promote inclusive economic growth.

Adesina said infrastructure projects were among the most profitable investments any society can make as they significantly contribute to propel and sustain a country’s economic growth.

He said infrastructure, when well-managed, provides the financial resources to do everything else.

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