During her State of the Nation Address at the opening of the 2013/2014 Budget Meeting in Parliament, Her Excellency the State President, Dr Joyce Banda, said Malawi’s economy is set to grow by 6.1% with inflation projected to decrease to an average of about 7.4% in 2014. Further positive indications of economic revival are that the Kwacha has made a recovery against the dollar from MK420 to MK347 and foreign reserves have increased from 1 week to 1.5 months.
Malawi’s economic recovery can largely be attributed to the macro-economic strategies implemented by President’s Banda’s government. Through a series of economic reforms and programmes the government has encouraged the diversification out of agriculture into manufacturing, agro-processing and tourism.
“We have started to experience the first signs of economic recovery. We were forced to make some difficult decisions, but they were the right decisions. The road to recovery is long and some of our policy options have been tough but in the last year we have laid the foundations for healing and recovery. Building on these foundations will be the focus for the next phase,” said President Banda.
During her address, President Banda outlined how the tax regime in Malawi has been reviewed to make it friendly to business, investors, and to support Malawi’s job creation agenda. Added to this, procedures for business licensing, work permits and visas have also been reviewed and simplified to encourage foreign investment and tourism into Malawi.
“We have implemented a policy of liberalising the process of accessing foreign exchange for imports, business and travel allowances. Additionally,exporters are now allowed to keep a larger portion of their earnings in Foreign Currency Denominated Accounts. The plan now is to allow them to keep even more so long as they reconcile their export receipts,” said President Banda.
In her address President Banda highlighted that the economic turnaround had begun one month earlier than projected and that under the Economic Recovery Plan (ERP), no debt had been created.
The International Monetary Fund (IMF) confidence in Malawi returned as the government renegotiated the IMF’s Extended Credit Facility. This has led to the resumption of donor support and two disbursements from the IMF, which are twice the normal quarterly amount, have been secured. After meeting most of the agreed targets USD24milion has been released to Malawi.
Looking at Malawi’s fiscal performance domestic revenues have been surpassed by K0.6billion largely due to tax revenues which amounted to K120.9billion against a programme target of K118.9billion. Government expenditure was also contained with a total of K242.6billion spent against a mid-year target of K249.8billion. The repayment of domestic debt slightly over performed and thereby reduced Malawi’s stock of domestic debt.
Another sign that Malawi is gearing up for economic growth was the announcement that the country’s first ever tea auction floor will be opened later this year, creating a local market for tea for the first time which is expected to maximise foreign exchange earnings.
The President’s address outlined plans for large infrastructure projects. One billion USD has been invested into a railway by Vale and plans are in progress for the construction of a new international airport in the resort district of Mangochi in Southern Malawi. Other infrastructure projects include the construction of a large soccer stadium in the capital, Lilongwe, which will be completed by 2015 and the upgrading of rural roads with the deployment of 28 graders to rural districts.
“These initiatives will create jobs for our people; create local market for our farmers and broaden foreign exchange reserve for our country.” said President Banda.
Securing reliable energy supplies is a priority for Government with a three-year Coal Fired Power Generation project planned and the signing of Malawi-Mozambique Power Interconnector Agreement in April to promote regional interconnectivity. Under the Malawi Rural Electrification Programme, 27 rural trading centres will be electrified by December 2013. Kapichira Hydro-power Project will add 64 Mega Watts to the national grid and the USD6 million solar power plant in Lilongwe will add afurther 850 Kilo Watts.
The manufacturing sector is also on the up with the development of a new textile factory by a Dubai based company in Lilongwe as well as the construction ofa-state of-the-art agro-processing plant for banana and mango pulp in Salima, central Malawi. In the next few months, President Banda’s Government will also commission cotton ginneries in Chikhwawa, Salima and Karonga districts. Sunseed Oil Ltd is putting up a plant to process crops into edible oils and animal feed for both local and export markets. This will help Malawi save US$45 million in crude edible oil imports and the company projects that it will earn about US$52 million from the export of soya cake.
“Government will make a concerted effort to remove investment barriers in such areas as land, energy, transport infrastructure and in the issuance of permits. These investments clearly demonstrate the growing confidence in Malawi’s economic recovery programme,” said President Banda.
Non-agricultural sectors have also been reorganised to promotegreater investment and competition. In the area of transport, the Government is implementing an open sky policy to allow more and competitive flights in and out of Malawi. Ethiopian Airlines has been identified as a strategic partner for Air Malawi and the new Air Malawi (2012) Ltd is expected to start operations once all the mandatory requirements have been fulfilled.
“I would like to express my personal gratitude to all Malawians for their sacrifices and the confidence entrusted in me and my Government during this period of economic recovery. We have laid a solid foundation for hope, prosperity and growth. During the year under review, we have brought Malawi back from the brink – politically, financially and economically. We are now in a position where we can begin to focus more clearly on the long term. The road to recovery has not been easy. Nonetheless, let me reassure all Malawians that a bright light shines at the end of the tunnel,” said President Banda.