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Wednesday, September 17, 2008

"Malawi continues to demonstrate strong economic performance" - IMF Country Manager

International Monetary Fund (IMF) says Malawi
continues to demonstrate strong economic performance, citing an
increase in its exports.

IMF country manager to Malawi Maitland MacFarlan said Tuesday that in
the past four years, Malawi’s export trends have been particularly
favourable, hitting a record US$1 billion (K140 billion) last year.

MacFarlan told the press in Lilongwe that the country was expected to enjoy an economic growth projected at 8.7 per cent.

Economic growth is estimated to have been 8.6 per cent in 2007-owing to
a strength in the agricultural sector and growing contributions from
construction, manufacturing and service industries.

“Export trends have been particularly favourable. Exports have roughly
doubled over the last four years and will receive a further boost from
2009 on as uranium production comes on stream.

“While inflation has been rising over recent months, this largely reflects the upward move in international oil prices.

With support from moderation of oil prices, adequate domestic food
supplies, and ongoing monetary restraint, inflation is expected to
return to the 7 to 8 percent range,” McFarlan said.

He said an IMF mission which was in the country for the last weeks led
by Andrew Berg, fully supported government’s intentions to adhere to
the fiscal framework underlying the 2008/09 budget.

He said the IMF further supported government’s intention to further reduce public domestic debt.

The reduction in public debt, both domestic and external, since 2005
had generated savings of around four per cent of GDP in debt service
costs—releasing these funds for

poverty reduction and other high priority spending activities, according to McFarlan.

The IMF resident representative also said the mission discussed with
authorities the implications of the recent sharp increases in
fertilizer prices on the fertilizer subsidy programme.

“The IMF team agreed with the government’s intention of meeting any
spending increases on the fertilizer program though a combination of
increased support from donors,

improvements in domestic revenue performance and spending g restraint elsewhere in the budget,” he said.

MacFarlan said the immediate objectives of the government’s new program
would be to maintain macroeconomic and financial stability over the
coming year, especially in view of the pressures created on the fiscal
position and the balance of payments by recent commodity price shocks.

He said cutting domestic debt would require, among other things,
maintaining progress in reducing domestic debt to support a steady
build up in Malawi’s international reserves.

According to MacFarlan, Malawi’s international reserves remained
relatively low in comparison with most other countries in the region.

IMF, a few months ago increased Malawi’s financial assistance under
Poverty Reduction and Growth Facility (PRGF) arrangement programme by
US$16.9 million to US$ 79 million to help meet a larger balance of
payments need brought about by higher fuel and fertilizer prices.

IMF said the decision to increase the financial assistance came after
the IMF executive board completed the sixth and final review of
Malawi's economic performance under a three-year Poverty Reduction and
Growth Facility (PRGF) arrangement.

The board also waived the non-observance of the end-December 2007
performance criterion on central government domestic borrowing,
according to a press

release on IMF website.

The three-year PRGF arrangement for Malawi was approved on August 5,
2005, originally for a total amount of US$ 62.1 million to support the
government's economic programme

for 2005-2007.

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