Goodall Predicts Kwacha Stability by 2017

….proposes budget template

By: Happy Arnold Soko

Minister of Finance and Economic Planning Goodall Gondwe has predicted total Kwacha stability by early 2017.

Gondwe:  Kwacha to stabilize by 2017
Gondwe: Kwacha to stabilize by 2017

Speaking in an interview with The Malawi Star on Thursday, Finance Minister said that government is working on stabilizing the kwacha that is hovering between 20 and 25 percent inflation rate to a single digit.

With commodity price on the increase, government has allocated $ Us1.7 billion for the 2016/17 financial year budget to arrest trade deficit and balance of payment deficit which has become larger for the past years.“Government is implementing three elements of

“Government is implementing three elements of economy now, one is that there is inflammation that is a hardly going down. We are hovering between 20 and 25 percent. We opt to bring this to a single digit but we haven’t.

Because of that, interest rates are going up and not coming down. This is due to lack of production in the economy as we would like to have,” explained Gondwe in an interview.

He attributed the higher exchange rates to low productivity in the export sector and loss of budgetary support.

He stated, “By next year, exports will go up and if we do, this will stabilize the exchange rate. We should have higher economic growth but we are still at three percent so we ought to be doing something, the exchange rate is going down because we are not producing enough export and at the same time we have lost the budgetary support and our tobacco exports are dwindling down. We hope to gets exports up by next year and if we do, the exchange rate will stabilize. We are seeing to it that economy stabilizes so that we start growing again.”

However, Economic Association of Malawi (ECAMA) president Henry Kachaje proposed to government to come up with new and complete budget template.

Kachaje: Govt to produce new budget template
Kachaje: Govt to produce new budget template

In his remarks, Kachaje urged government to stop conducting business as usual. He bashed the idea of government for mismanaging the limited resources in the presence of various economic challenges.

According to Kachaje, government should follow a proposed radical budget that is going to focus more on incentivizing productivity and self-reliance in the country.

Cited Kachaje,“We are talking about the budget that is going to finance enhanced productivity. The way we have been doing our budget is business as usual. It’s where you have limited resources of money and you keep on spending even sometimes when you do not have means to generate that. This is our opportune time as a country where we should look again the way we do our budgeting.”

Malawi has conflicting priorities and fails to carry out productivity for the enhancement of economic development.

Since 2002, commercial bank lending rates have been around 40% per annum. The high-interest rates have increased the cost of production to the private sector and are crowding out borrowing as the treasury bills appear more attractive. The high-interest rates have also been a deterrent to start up business.

 

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