Malawi President Joyce Banda said economic growth will probably accelerate to 6.1 percent next year after she implemented “painful” economic reforms at the advice of the International Monetary Fund.
Expansion in the southern African nation is expected to reach 5 percent this year from 1.8 percent in 2012 while inflation will remain “relatively high” through to the end of December, Banda told lawmakers today in the capital, Lilongwe.
“The developments we have seen in the past 12 months must give us hope that the reforms are working,” Banda said. “Yes, there has been pain and we may continue experiencing pain though at a reduced level for some time.”
Banda devalued the kwacha by a third against the dollar and deregulated fuel prices a month after taking office in April 2012, meeting conditions from the IMF for the resumption of foreign aid.
The devaluation spurred an increase in imported food and fuel prices, stoking inflation, which stood at 36.4 percent in March, and prompting nationwide protests over eroding living standards. The central bank has left its benchmark interest rate at a record 25 percent since December, a six-year high.
Inflation is expected to “sharply decelerate” next year to an average of 7.4 percent, Banda said. “My administration will therefore continue to pursue with vigor to bring down inflation and achieve a continued appreciation of the local currency to sustainable levels,” she said.
The nation of 15 million people, which is Africa’s biggest exporter of burley tobacco, relies on aid for more than 40 percent of its budget. It is one of the world’s poorest countries with a gross domestic product of about $5.6 billion, according to the World Bank.
The kwacha weakened 2.3 percent to 362.5 per dollar by 3:41 p.m. in Lilongwe, extending its decline this year to 7.7 percent, Africa’s third-worst performing currency.