Fiscal, monetary policies should match—Goodall

Gondwe:  There is need for both fiscal and monetary policies to match if Malawi’s economy is to achieve balanced growth
Gondwe: There is need for both fiscal and monetary policies to match if Malawi’s economy is to achieve balanced growth

Malawi Finance, Economic Planning and Development Minister Goodall Gondwe has said there is need for both fiscal and monetary policies to match if Malawi’s economy is to achieve balanced growth in the coming years.

Gondwe made the call Friday in Mangochi when he opened a day-long monetary and exchange rate policy conference for economists, key players in the business sector, development partners and members of the academia.

“If fiscal and monetary policies are moving side by side, then balanced growth should take place,” he said.

Monetary policy is a process by which a monetary authority, usually a central bank, controls the quantity of money in circulation for purposes of attaining stability and economic growth objectives of an economy.

On the other hand, fiscal policy entails use of government revenue collection and expenditure to influence macroeconomic conditions.

“We do not want fiscal policy to over-burden monetary policy and likewise, monetary policy should not be an impediment to economic activity,” he added.

Gondwe said the Democratic Progressive Party (DPP) government’s objective is to grow the economy by an average of 7.5 percent by 2019.

He also said by then, Malawi’s exports should have doubled and poverty reduced.

The minister said government envisions reducing the number of people living below the poverty line threshold of $1.25 (roughly K412) a day to around 30 percent from the current 50 percent of the entire population.

“We want to be in a position where economic growth and poverty reduction will progress in tandem,” he added.

Gondwe, however, challenged participants to desist from being too theoretical and obsessed with economic text-books, but rather be practical if Malawi is to achieve economic stability.

Earlier, Reserve Bank of Malawi (RBM) Governor Charles Chuka said the conference will help enhance RBM’s accountability to the public in the way it conducts its monetary and exchange rate policies.

The conference would also help economic experts share experiences on monetary and macroeconomic stability, among others, said Chuka.

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  • Ngoma, Thomas, London

    Absolutely!!!!! That is what I have been banging on about!!!! Otherwise if fiscal policy runs counter to and at loggerheads with monetary policy as Malawi has done in the past then everyone might as well pack up their bags and go home to the village! Disregard of this simple fact has hurt the Malawi economy big time over time. A Gondwe, that statement meets my full approval! Balance growth is what this is all about ….i.e. a) primary balance (govt income vs govt spend) and b) current account balance (CAB). Of the two CAB is what triggers economic crisis driven by external borrowing and importations…causing IMF to set shop in Malawi….get these basics right and the economy will be on the way to recovery. These by themselves are not panacea but are like tilling the field ready for planting. Malawi lacks seeds for wealth creation. I will bring the seeds to grow the national wealth – from Nsanje, Neno to Songwe in Chtipa! The elusive growth secrets must be revealed to Malawi and revealed they will be very, very soon!

    • Ngoma, London,

      Ignoring CAB leads to current account deficit (CAD) that if left unchecked leads to ruinous economic crisis such as Malawi faced in 2012 when the country ran out of forex.