Malawi Predicts Improved Growth with Forex Reserves Rebounding
BLANTYRE, February 23 – Malawi anticipates a significant economic rebound, projecting a growth rate of 3.2% in 2024, a marked improvement from the 1.5% recorded in the previous year, as announced by Finance Minister Simplex Chithyola Banda in a budget speech on Friday. The country in southern Africa has grappled with foreign currency shortages, resulting in shortages of essential commodities such as fuel, medicines, and fertilizers. In response to the economic challenges, Malawi devalued its currency by approximately 30% last year to alleviate the situation.
Finance Minister Banda highlighted that foreign exchange reserves showed improvement towards the end of December 2023, with expectations for further recovery in the medium term. The optimistic outlook for the economy is attributed to large-scale farming and anticipated growth in sectors such as construction and manufacturing. Banda forecasted a higher economic growth rate of 4.8% for 2025.
Banda acknowledged the country’s resilience in overcoming economic and climate-related shocks but noted that fiscal challenges persist due to expenditure pressures surpassing revenues. Starting in April 2024, a budget deficit of 1.43 trillion kwacha ($858 million) is expected for the upcoming fiscal year, constituting 7.6% of Malawi’s gross domestic product (GDP). This compares to a deficit of 1.36 trillion kwacha or 8.9% of GDP in the preceding fiscal year.
The devaluation of the exchange rate has contributed to Malawi’s complex debt situation, and Banda confirmed ongoing talks with bilateral and commercial creditors to restructure the debt. Despite these challenges, the government remains optimistic about the outcomes of these negotiations.
The International Monetary Fund (IMF), recognizing Malawi’s financial difficulties, approved a loan of approximately $178 million in November. However, the IMF has highlighted the need for substantial debt relief, suggesting that Malawi requires almost $1 billion by 2027. As Malawi works towards economic recovery, managing the budget deficit and addressing debt concerns will be crucial to the country’s fiscal strategy.
($1 = 1,666.7300 kwacha)
