The first session of the Reserve Bank of Malawi (RBM) Monetary Technical Policy Forum has ended with calls for the government to be realistic in economic projections and greater coordination between fiscal and monetary policies.
This session follows the Monetary Policy Committe (MPC) meeting last month which the maintained the policy rate, the rate at which commercial banks borrow from the central bank, at 26 percent.
Speaking at the event, Economics Association of Malawi (Ecama) senior economist Lucius Pawa backed the decision, saying it was based on sound macroeconomic fundamentals.
However, he cautioned against overly optimistic expectations, dismissing the possibility of inflation dropping anytime soon.
“Expectations on inflation are very optimistic. We need to be realistic,” Pawa said, stressing the need for sound macroeconomic fundamentals to sustain stability,” said Pawa.
The observation comes at a time government is projecting annual economic growth to rebound to four percent in 2025 from a moderate 1.8 percent in 2024.
Last year, government initially projected growth at 3.2 percent, but was forced to revise it to 1.8 following the disruptions caused by the El Nino weather phenomenon.
Pawa noted that the growth prospects, which are predicated on robust growth in the mining sector, could fall flat, considering that investments in mining take a long time to generate returns, adding that the agricultural sector remains vulnerable to climate risks, which could also derail projections.
Responding to a query on the perceived lack of coordination between local monetary and fiscal policies, RBM acting director of economic planning and research Chimwemwe Magalasi said commercial banks should direct funds toward productive sectors to spur economic growth.
He also cautioned against misinformation on social media, which he said could create unnecessary panic in financial markets.
On her part, RBM director of financial markets Chakudza Linje observed that while domestic debt remains sustainable, international debt poses challenges due to the foreign exchange required to service it.
Experts at the forum also suggested that Malawi could look for new markets to benefit from shifting global trade dynamics.
