Wednesday, October 28, 2009
By Nyasa Times
Published: October 27, 2009
Slow donor inflows may affect Malawi’s domestic borrowing targets for the 2009/10 fiscal year, and the government could borrow more than planned due to lower donor support, Finance Minister Ken Kandodo said on Monday.
Malawi’s government plans to cut domestic borrowing in the current fiscal year by about 1.3 percent of gross domestic product from last year’s 1.4 percent, but Kandodo said the target could be missed.
“On the expenditure side, we are well within the budget framework, however, we have experienced slow donor disbursements which may affect our domestic borrowing targets,” he told Reuters in an interview.
In the last five years the southern African nation has managed to reduce domestic debt from 25 percent of GDP at the beginning of 2004 to 11.5 percent in September last year.
The International Monetary Fund last year advised the government to reduce domestic borrowing because it would crowd out the private sector and slow growth.
Malawi, which relies heavily on donor assistance for its development budget, expects about $578 million from donors this financial year, down from $642 million last year.
Donor inflows account for over 50 percent of the country’s development budget.
Kandodo said he would still manage to contain inflation in single digits and that the economy would expand as forecast.
“We have seen inflation continue to trend downwards, now at 7.5 percent in September, while growth prospects remain good and we are optimistic that the economy will expand by 7.9 percent this year and annual average inflation will remain at single digits of about 9.7 percent,” he said.
Malawi has experienced a relative economic boom in the last four years with the economy expanding an average 7 percent.
Consecutive bumper yields, a growing manufacturing sector and more activity in the telecommunications sector pushed last year’s growth to 9.7 percent.– Reuters