Malawi’s GDP growth slows, fuel prices hurt

Malawi’s economic growth slowed more than expected to 6.0 percent last year, partly due to higher fuel prices and reduced income from lower tobacco prices, Finance Minister Ken Lipenga said on Thursday.

The rate of growth was lower than government’s initial forecast of 6.9 percent after a 7.1 percent rise in 2010.

“In the face of escalating international fuel prices, reduced disposable income due to lower tobacco prices, scarcity of foreign exchange and intermittent power supply, the economy slowed down in 2011 from the initial growth projection of 6.9 percent to 6.0 percent,” Lipenga told Reuters.

Malawi has in recent years seen GDP growth averaging 7.4 percent thanks to bumper maize harvests as a result of the implementation farm subsidies, which started in 2005.

The International Monetary Fund has previously said government’s growth projections, including a 6.6 percent GDP forecast for 2012, were unrealistic due to industrial constraints a budget support freeze.

Malawi has been by hit a freeze in aid – which accounts for 40 percent of the budget – since last year as several Western donors have withheld funds due to concerns about creeping autocracy under President Bingu wa Mutharika.

The country is facing a $121 million budget shortfall in the current financial year due in part to a suspension of an International Monetary Fund loan programme.

Life has become increasingly difficult in the past year in the southern African country due shortages of fuel, medicine and foreign currency.

Last week, police arrested a leading lawyer and government critic for asking parliament to impeach the president for mismanaging the economy.

Civil society groups are demanding Mutharika to account for his wealth, mend relations with Britain – the country’s former colonial master – and restore bilateral aid ties.

Last July 20 people were killed by Mutharika’s forces to quell country-wide protests against his rule.

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