Government hopes to maintain single-digit inflation at 7.1 percent and a growth rate of seven percent in the next five years, according to the final draft of the Malawi Growth and Development Strategy (MGDS) III.
The MGDS III will be implemented from 2017 to 2022.
It is the fourth medium-term national development strategy aligned to the country’s long-term development aspirations which are articulated in Vision 2020.
The previous development strategies include the Malawi Poverty Reduction Strategy Paper (MPRSP), MGDS I and II.
MGDS III which is premised on the fact that Malawi will have to generate sufficient domestic resources to support its implementation is built on the theme Building a Productive, Competitive and Resilient Nation.
Government hopes to contain the single digit inflation with a strict monetary policy by ensuring that the commercial borrowing rate is affordable to the private sector to induce higher levels of investment.
The average gross domestic product (GDP) growth rate during the MGDS III implementation is expected to be 6.2 percent, which assumes an investment of $1.2 billion (K876 billion) financed by both the public and private sector.
During the five year period, inflation is projected to grow by 5.6, 7.1, 7.7, 7.5 and 7.7 percent in 2018, 2019, 2020, 2021 and 2022 respectively.
GDP on the other hand, is expected to grow by 6.9, 6.4, 6.1, 6.2 and 6.1 percent in 2018, 2019, 2020, 2021 and 2022 respectively.
In the medium term, total revenues and grants are expected to average 28 percent of GDP. Total expenditure is projected to outweigh the revenues.
“Unlike its immediate predecessor, MGDS III is built around a theme that aims to improve productivity, turn the country into a competitive nation and develop resilience to shocks and hazards. The MGDS III also consolidates the efforts that Malawi is undertaking to reposition herself as a global player,” said Finance, Economic Planning and Development Minister in a statement accompanying the final draft.
In an interview on Tuesday, economist Gilbert Kachamba, who is dean of social science at Catholic University, has reservation on the country containing inflation to a single digit, which he said cannot be sustained with erratic raid-fed agriculture for maize production, which drives the inflation rate.
He said: “A growth rate of seven percent is a far-fetched dream in as far Malawi is concerned. We have bigger economies, but they are not talking about growth of this magnitude.”
International Monetary Fund (IMF) resident representative Jack Ree said while there is a good macroeconomic window of opportunity opening at the moment with the continued descent of inflation and stability of kwacha, growth will not come in a sustainable fashion unless the country manages to unlock private sector investment potential.
“There are a large back log of demand for investment that were left unmet due to macroeconomic instability. And compared to other African countries, we are more advanced in terms of policy adjustment. Therefore, conditions are there.
“However, we will also have to find a way to bring on significant levels of investment in infrastructure without risking fiscal sustainability,” he said.
MGDS III identifies five key priority areas of agriculture, water development and climate change management; education and skills development; transport and ICT infrastructure; energy, industry and tourism development and health and population. n