The International Monetary Fund (IMF) has projected Malawi’s economy to grow between 3 and 4 percent in 2016, subject to weather conditions.
The fund has since pegged Malawi’s gross domestic product (GDP) for 2015 at 3 percent.
In a statement issued at the end of a review mission in Malawi on Wednesday, the IMF also expects Malawi’s inflation to continue going down.
Malawi’s inflation has since fallen slightly to 23.4 percent in February 2016 from 25 percent in December, 2015 with non-food inflation on a clear declining trend and the IMF says this shows that adjustments in monetary and fiscal policies are having their intended effects.
“Prudent fiscal policy, when combined with a tight monetary stance to maintain positive real interest rates, should place inflation on a downward path,” reads the statement, in part.
“The mission reached understandings to ensure that recent improvements in macroeconomic policy implementation are sustained,” says the IMF.
The fund says restoring macroeconomic stability by bringing inflation down to single digits, remains the most important policy challenge in the near term.
It says the revised budget approved by parliament recently is sufficient to meet the end-June 2016 programme target on net domestic financing.
The IMF observes that Malawi’s commitment to the flexible exchange rate regime and the automatic fuel pricing mechanism have helped Malawi to respond to external shocks.
Among other things, the Malawi kwacha has begun to stabilise and attributes this to absorption of excess liquidity from the banking system by the Reserve Bank of Malawi, greater fiscal discipline by the Malawi government and to prospects of the tobacco season.
The mission team, led by Oral Williams, expects Malawi’s request to complete the seventh and eighth reviews under the Extended Credit Facility to be be submitted for consideration by the IMF’s Executive Board in May 2016.
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