Malawi Minister of Economic Planning and Development Atupele Muluzi on Tuesday said government understands the urgent need to reduce the prevailing high lending rates and double-digit inflation rates to stabilise the economy.
Atupele said this at Capital Hill in Â Malawiâ€™s capital, Lilongwe, during a news conference on the Economic Recovery Plan (ERP) which the Joyce Banda administration has formulated to resuscitate the economy.
Said the minister: â€œGovernment understands that for the economy to stabilise, there is need to bring back inflation rate to single digit, reduce interest rates, improve liquidity challenges among commercial banks and also cushion Malawians from the unintended result of economic reforms.â€
Malawiâ€™s headline July inflation rate stands at 21.7 percentâ€”the highest within the Southern Africa Development Community (Sadc)â€”while base lending rates among commercial banks have also jumped to as high as 45 percent following the hike in bank rate by the Reserve Bank of Malawi (RBM) in July to 21 percent from 16 percent.
Atupele, while describing the recovery plan as participatory, admitted that the country is still dogged by some economic challenges. But he said the plan will help sharpen the whole process of stabilising the economy.
â€œThe economic recovery plan is just to ramp up ongoing efforts within the annual budget and the Malawi Growth and Development Strategy [MGDS] to stabilise the economy and cushion Malawians from the effects of the past 20 months,â€ he said.
He said the recovery plan is a product of extensive local consultation by the Peopleâ€™s Party (PP) government led by President Banda as well as a national dialogue on the economy which took place in Mangochi earlier this year.
During the news conference, Principal Secretary in the ministry Ted Sitimawina said government expects the economy to fully recover within a period of 12 to 18 months, starting from April this year.
He said when the kwacha was devalued by 49 percent, headline inflation rate rose from around 17 percent to 20 percent which he said was contrary to the assumption underpinning the recovery plan.
He also said government expectation was that by the end of 2012, the inflation rate would average 18.4 percent.