Malawi Leader Projects 5.4% Economic Growth

Malawian President Peter Mutharika insisted on Tuesday that the national economy was on the road to recovery and that his policies were beginning to pay dividends.



"The Malawi economy in 2016 is projected to rebound with a strong growth of 6.5 percent," Mutharika said in his state of the nation address before Malawi's 193-member parliament.



He said the economy was projected to register real GDP growth of 5.4 percent in 2015, despite recent setbacks – including flooding and dry spells – that have affected the country's agricultural production.



Mutharika said the economy had turned a corner and that Malawians would soon feel the effect of the raft of reforms his administration was putting in place.



Mutharika has reformed the country's civil service, trimmed the cabinet from 43 to 20 members, prohibited government ministers from traveling abroad and turned down requests for pay raises.



"The sound macroeconomic policies that my government has been implementing over the past financial year have already started bearing positive results," he said.



The president told lawmakers that Malawi's economic recovery was set to continue, with annual average inflation rates expected to drop from 23.8 percent in 2014 to 16.4 percent in 2015.



"This is due to the combined effect of the stable [currency] exchange rate and a significant decline in global oil prices," he explained.



"It is projected that inflation will continue on a downward trend and will reach an annual average rate of 12 percent in 2016," said Mutharika.



He told parliamentarians that his government had successfully concluded negotiations with the IMF under the latter's Extended Credit Facility (ECF) program.



The IMF last month provided Malawi with funding amounting to $18.1 million under the IMF's ECF initiative.



Mutharika cited a funding shortfall following Malawi's "cash-gate" corruption scandal, which resulted in a decline of donor support from about 30 percent of the country's total resource envelope to less than 20 percent in the 2014/15 fiscal year.



"In order to fill the revenue gap created by the deficit in donor financing," he said, "the government intensified the implementation of tax policy reforms aimed at improving the tax regime."



This, he asserted, was meant "to reduce loopholes and improve tax compliance and investor confidence."



Mutharika also announced that the government had embarked on a comprehensive review of tax legislation in order to improve tax administration.



He said the tax review would be completed by the end of the 2015/16 fiscal year.



Regarding mounting domestic debt, Mutharika said he was tightening expenditures to avoid over-borrowing.



"The government has also taken steps to strengthen debt management practices and restructure payment of outstanding arrears," he added.



The government, he went on to assert, "will avoid further accumulation of arrears through strict expenditure-control measures."



Finance Minister Goodall Gondwe is expected to present the new budget statement to parliament on Friday.



Malawi's 2015/16 state budget is estimated to stand at some 900 billion Malawian kwacha (roughly $2.1 billion).



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