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Malawi’s Economy May Expand 7% This Year on Food Production

May 23 (Bloomberg) -- Malawi’s economic growth will probably accelerate to 7 percent this year as good crop harvests boost food production, President Bingu wa Mutharika said.

The southern African nation’s economy expanded 6.7 percent in 2010, Mutharika said in a speech to parliament today in Lilongwe, the capital. The inflation rate is expected to remain below 10 percent even though international oil prices have led to higher fuel costs, he said.

Growth in the country, which earns about 60 percent of its foreign exchange from exports of burley tobacco, has averaged about 7.6 percent since 2005. Inflation was 7.1 percent in April, according to the national Statistics Agency. Malawi traditionally relies on foreign aid for about 40 percent of its annual budget.

The government planned to meet recurrent spending in the fiscal year through June 2012 with its own resources, Mutharika said. It was hoping donors would finance development projects, he said.

The U.K. is reviewing its aid program to Malawi, its Department for International Aid said May 20. Mutharika expelled the British High Commissioner to Malawi last month because of a leaked memo describing the African nation’s leader as combative and autocratic.

The European Union’s envoy to Malawi, Alexander Baum, said a group of donors which offers aid through the Common Approach to Budgetary Support hasn’t committed to help finance the 2011-2012 budget, according to the Nation newspaper.

Malawi is in talks with the U.K. government about resolving the diplomatic dispute, Mutharika said.

To contact the reporter on this story: Frank Jomo in Blantyre at fjomo@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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