Malawi forecasts 6.9 economic growth

The Malawian government has said it will grow the country’s economy by 6.9 percent this year and 6.6 percent in 2012.

Finance Minister, Ken Kandodo, addressing parliament on the budget, said that the growth rates, which will bring about a decline in foreign aid, are expected to be anchored by strong performance in the agriculture sector as it rebounds, as well as mining and construction," Kandodo told parliament.

He said: “Malawi's economy grew by 6.7 percent in 2010. Inflation, which slowed to 7.1 percent year-on-year in April, is forecast to decline to 7.0 percent this year and 6.9 percent in 2012”.

Reducing foreign aid

Foreign aid had accounted for 30 percent of all government receipts last year, compared to 21 percent projected for this year under a zero deficit budget designed to get the country paying for all recurring expenses, such as civil servants' wages, out of its own pocket.

Kandodo's speech made no mention of a decision by Britain, Malawi's single largest donor, to suspend aid worth 550 million dollars over the next four years due to a diplomatic spat between London and Lilongwe.

The argument stems from a leaked British diplomatic cable that referred to President Bingu wa Mutharika as "autocratic and intolerant of criticism".

Kandodo said Malawi would continue to need donor support, but it would be channelled towards development projects rather than the day-to-day costs of running the country.

The donor freeze, which other countries are said to be considering following Britain's example, has prompted fears of a dollar supply crunch in Malawi, putting pressure on the Malawian kwacha's exchange rate.

RUTERS/Williams