- In the first review of Malawi's economy after President Bingu wa Mutharika came to power, the International Monetary Fund (IMF) already observes a significant recovery. President Mutharika's efforts to tackle corruption and control public spending, although controversial in Malawi, were praised by the IMF report.
An IMF mission visiting Malawi yesterday told the press in Lilongwe that significant improvements were noted in the country's fragile economy. The IMF mission had visited Lilongwe to review the economic performance of the Malawian government, in line with loan agreements that foresee economic reforms by the Lilongwe government.
The IMF economists had noted a "satisfactory performance to date" and held that the new Malawian now was ready to embark on further IMF programmes, known as the "Poverty Reduction and Growth Facility (PRGF) arrangement". Discussions on this arrangement were already "progressing well," the IMF noted in Lilongwe.
The mission gave explicit praise to President Mutharika's economic reform programme, which earlier this year had caused a split in Malawi's ruling party. The President has embarked on a zero tolerance police regarding corruption, which had provoked the wreath of ex-President Bakili Muluzi. Mr Muluzi is generally seen to have spoiled Malawi's economic recovery during his second term by not taking corruption seriously, approving non-budgeted expenditures and alienating donors.
According to the IMF mission's statement, the team had been "encouraged by the new government's commitment to enforce stricter public expenditure management, as unbudgeted expenditures were the cause of a worsening macroeconomic situation in recent years. Likewise, the government's policy of zero-tolerance for corruption is very important," the statement said.
- The achievements made in both of these areas in a short time are impressive and are already providing economic and social benefits, the IMF mission said, further praising President Mutharika's reforms. The foreign economists also repeatedly pointed to earlier slippages, indirectly pointing to their disapproval of ex-President Muluzi's economic policies.
The results of President Mutharika's efforts already could be noted, the IMF team held. "There are now signs that Malawi's economy is improving: the domestic debt situation has eased and credit to the private sector has begun to expand. We now expect growth to rise to just under 5 percent in 2005, in part because of a strong expansion in private sector activity," the mission's statement said.
The IMF mission had also noted "the resumption of donor support" through these new policies. Western donor countries were now slowly returning to Malawi after abandoning the country during President Muluzi's second term. With new IMF approvals of its economic policy, the Lilongwe government can count on an even quicker recovery of donor confidence.
The Western donor community already was engaged in the government's review of its food security policy, a vital part of social policies in this extremely poor and food insecure country. After some good harvests, Malawi currently again is at the risk of a drought. The impact of a recent dry spell on agricultural output remains uncertain.
The cyclic droughts in Malawi have a large impact on ordinary people's income and food security and severely affect the national budget. Malawi's main export product remains tobacco. Rising food prices due to the recent dry spell had already increased inflation to 14 percent, the IMF noted with concern.
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