Malawi sitting on over $1 billion reserves

Post was last updated: July 24, 2019

By Taonga Sabola:

KALILOMBE—The government needs to be aggressive

Finance Minister, Joseph Mwanamvekha, has said Malawi is sitting on over $1 billion in combined gross official and private sector reserves which gives confidence to Capital Hill that the kwacha would remain stable in the medium to long term.

Mwanamvekha was speaking in Lilongwe on Tuesday at the start of the 2019 to 2020 pre-budget consultation meetings.

He said as at end June 2019, Gross Official Reserves were recorded at $759.89 million, representing 3.64 months of import cover.

“This added to holdings of foreign exchange by the market at $340.2 million this implies that the country’s foreign reserves are amounting to well above $1 billion

“This is unprecedented and it is for this reason that the Malawi Kwacha is expected to continue appreciating against other currencies,” Mwanamvekha said.

The local Chancellor of the Exchequer said Capital Hill projects a GDP growth rate of five percent in 2019 and a further seven percent in 2020 emanating from the huge amount of planned infrastructure development in the government and continued focus on growth potential sectors.

Mwanamvekha said now that macroeconomic stability has been achieved, the government’s focus, going forward, will be to attain inclusive, resilient and sustainable growth.

“Despite this remarkable progress in the economy, the budget continues to experience fiscal pressure. In the 2018/19 fiscal year, revenues did not perform as expected. This was largely on account of unsatisfactory performance of the tax revenues and parastatal dividends.

“Grants also underperformed on account of non-disbursement of projected budget support. This underperformance in revenue greatly affected the effective implementation of the budget considering the existence of too many competing needs against a limited resource envelope,” he said.

Mwanamvekha said the unpredictability of budget support continues to put pressure on the Budget especially where such revenues are programmed as part of the budget.

He said, as a result, the government has had to resort to domestic borrowing thereby increasing public debt.

“[The] Government will ensure that treaties are renegotiated and are up to date. Policy and institutional reforms in state-owned enterprises will continue being implemented in order to improve their performance,” he said.

Mwanamvekha said the budget will focus on promoting domestic and foreign investments, diversification in agriculture, promotion of manufacturing and value addition, investments in the energy sector, and ensuring value for money.

Economics Association of Malawi President, Chikumbutso Kalilombe, said there was need for Malawi to prioritise direct investment into the production and distribution of energy.

“Government also needs to be aggressive in attracting and incentivising foreign and even domestic investors to invest in the energy sector. Talks of delays in process and policy implementation lags abound; We support government’s sentiments for country to explore a basket of alternative energy sources such as solar, wind and thermal. It is the action that we now need to see,” Kalilombe said.

Malawi Economic Justice Network Executive Director, Grace Kumchulesi, underscored the need for government to improve budget transparency, review of allocation mix within sectors, and strengthen programme based budgets as well as front-line service delivery systems.

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