Malawi Economy – Stronger Performance under DPP

By Harold MacBrey

Over the past four years, the government of President Arthur Peter Mutharika (APM) has made great strides in improving the economic status of the country, manifested through macro-economic stability, inflation reduction and a rebound in economic growth which reached 4 per cent in 2017 and is projected to exceed 5 per cent.

Recognising this recovery, in April 2018, the International Monetary Fund (IMF) approved a new Extended Credit Facility for three years. This is a strong indication of the ongoing economic progress under APM and a vote of confidence for his administration.

Mzuzu Dual Carriage Way

The economic recovery marks a departure from mismanagement under the last administration. Following the cashgate scandal in 2014, donors and other development partners lost confidence in the government’s handling of public finances and withdrew budget support. However, the government’s reform program under DPP has encouraged donors to increase support, and the country is now on the road to economic prosperity due to APM’s stewardship of the economy.

A few indicators underline the strong economic recovery: In 2014, inflation was high at 24 per cent, but has since fallen to 9 percent, while the benchmark interest rate was equally high at 25 per cent and is now at 16 percent and likely to decline further.

karonga -songwe road

In addition, Malawi’s gross official reserves (import cover) have increased to about 4 months from 2 months and the Kwacha is now stable which has improved the investment climate.

According to the Ibrahim Index of African Governance (2018), Malawi has registered notable improvements in its budgetary and financial management.

All these developments mean that it has become easier to do business in Malawi as local business people can more readily develop the economy through Small Scale Enterprises while large investors focus on new export opportunities.

In addition, the business community is also benefiting from the economic stability, finding it easier to access foreign exchange for cross-border trade, and to import essential equipment.

The economic progress and stability has resulted in the price of fuel being stable for the past two years while prices of basics goods are being contained at reasonable levels.

The economic turnaround is also manifested by the number of cars Malawians are buying, construction of iron sheet roofed houses and the influx of motorbikes in rural areas.

The growth of the economy has increased the demand for quality infrastructure services, leading the government to investments in road infrastructure, the electricity grid, and water supply. These strategic investments will support better agricultural and manufacturing production which will further boost economic growth.

Economic Highlights:

 Economic growth has rebounded to 4 percent (2017)

 Inflation has fallen sharply to single digit figures, below 10 percent

 Interest rates have fallen steadily supporting credit to private sector

 The Malawi Kwacha has stabilized over the past 2 years

 Donors confidence has been bolstered including a new program with IMF

 Official foreign exchange reserves recovered to about 4 months cover

 Notable improvements in budgetary and financial management in the public sector.