Malawi cuts rates to 20%

13/11/2006 13:57

ilongwe - Malawi's central bank on Monday cut its bank lending rate by five percentage points to 20% because of lower inflation and an improving economy, a bank spokesperson said on Monday. "Inflation has been dropping tremendously this year," central bank spokesperson Mirriam Wemba said. "We can (now) forecast that by December next year, the (inflation) rate will drop to (around) eight and five percent," she added. The International Monetary Fund, which last month cancelled 90% of Malawi's debt burden of $2.9bn, wants to see inflation for 2006 reduced to single digits in the impoverished southern African nation. The National Statistical Office put year-on-year inflation at 12% in August. Financial analysts welcomed the central bank's decision, adding the reduction in rates was long overdue. "This will stir production and growth," said Sadwick Ntonakuntha, economist at Malawi's chamber of commerce.

Creditors continue to write off Malawi's debts

afrol News, - Malawi is enjoying a great deal of benevolence from its creditors that continue to cancel the country's huge debts. First, it was the Paris Club that announced that it would write off Malawi's stock of debts on 19 October.

Now it is the turn of Japan that has done tremendous efforts to lobby for Malawi to have its debts written off by the World Bank and International Monetary Fund through the Highly Indebted Poor Countries (HIPC).

Malawi owed Japan US$ 250 million, which amounted to over half of the cancelled debt. The two countries went further to sign a new grant of kwacha 860 million (US$ 5.9 million) for the improvement of rural health facilities.

Debt cancellation signals a major victory for the economic policies of President Bingu wa Mutharika.

However, Malawi continues to sign more debts and grants so as to grease its economy and improve better living conditions for its citizens.

It signed a grant agreement with African Development Bank (ADB) amounting to US$ 22.2 million. The grant will allow Malawi to finance small holder crop production and marketing project.

The agreement was signed by the bank's group Vice President for Sector Operations, Mrs Zeinab El Bakri and Malawian Ambassador to Egypt, Mr M'Madi Yahya in Tunisia, an ADB statement stated.

Mrs El Bakri emphasised the importance the bank group attaches to portfolio quality improvement and timely fulfilment of the grant conditions.

"As the Bank undertakes to support this operation, we look forward to working closely with the government to ensure its timely implementation and also build synergies with other Bank activities in the sector in order to alleviate poverty and increase the income of the population of Malawi," she said.

Ambassador Yahaya commended the bank for its" relentless efforts" in supporting Malawi's development programmes. "We do not take this gesture for granted. The government of the Republic of Malawi would therefore like to assure you that it will continue to follow the laid down procedures in implementing Bank-funded projects," he added.

The project comprises the development of irrigations and the mitigation of environmental impact as well as support to farmers in crop production, management and marketing. It will cover 19 of Malawi's 28 districts.

It was also said to contribute to poverty reduction and food security in rural Malawi by increasing productivity and income of rural households. This was to be achieved through the intensification and diversification of the existing cropping system and improvement of the marketing system which will significantly increase production, productivity and incomes of small farmers while improving household nutrition and environmental management of natural resources at the same time.

The estimated number of beneficiary households was said to be 8,756, or a total of 45,531 people of which 4,000 were households headed by women. About 76 percent of Malawi's rural population was to benefit, directly or indirectly, from the market improvement activities, according to the bank's optimistic figures.