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Thursday, February 09, 2006

Agricultural prospects look promising in 2006

Thursday, 9 February 2006,

By Frank Jomo

Despite agricultural prospects look promising in 2006, the effects of drought that have rocked the Southern Africa’s landlocked country in the past decade will continue to weigh down on the country’s economic growth.

The IMF forecasted a growth rate of 8.2 percent in 2005/06 fiscal year. However economic analysts were pessimistic. But government is optimistic it will meet the target thanks to utmost good fiscal management by the Bingu administration.

The currently hunger, which affected about half the population of the country said to be between 10 – 12 million raised inflation. Food accounts for 58.1 percent in Malawi’s Consumer Price Index (CPI).

The Standard Bank forecasts that everything being equal, the current level of fiscal discipline is maintained and a good harvest is realized, inflation will ease to 12 percent or less by the end of the year. In December 2005 inflation hovered around 16.5 percent.

The IMF reopened its aid taps to Malawi in August last year with a three-year US$55.9 million Poverty Reduction and Growth Facility (PRGF), which it had been denying the country the past two to three years due to economic maladministration, institutionalized corruption and poor governance during the last years of the Bakili Muluzi government.

The bank adds that the economic growth would very much depend also on the maintenance of the fiscal discipline the Mutharika administration has professed which has won itself praise from the donor community like the International Monetary Fund (IMF) and the World Bank.

Forecasts indicate that agriculture will register substantial growth in 2006 owing to a surplus of the staple food, maize due to good weather and fertilizer subsidy the Bingu wa Mutharika government introduced. “However, the accumulated effect of drought over recent years in impoverishing many farmers may slow the rate of recovery to the last half of 2006,” predicts the bank in its report published on its website.

A report released by the Standard Bank of South Africa in Johannesburg says Malawi’s economic growth will continue to be influenced by the behavior of the agricultural sector, which accounts for 40 percent of the country’s Gross Domestic Product (GDP).

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