Malawi economy to recover in a year, says IMF

The International Monetary Fund (IMF) says the economy would bounce back in a year’s time following the government’s economic reforms which include the liberalization of foreign exchange regime which has seen the Kwacha tumbling in value by 48 per cent.

IMF division chief in Africa Department Tsidi Tsikata told the BBC that the government of Malawi has devalued the local currency at a right time, saying the devaluation would improve the availability of the foreign exchange in a very short period.

“Malawi situation is not dire, the turnaround will be much quicker in a relatively short time,” said Tsikata who said the economy should be back on track within a year.

President Joyce Banda last Friday told a press conference that Malawi needs about $1 billion to turn around the ailing economy which could be on track within 18 months.

Banda, who took office after the demise of President Bingu wa Mutharika just a month ago, says she will do whatever the IMF tells the government to win back the much needed aid.

Tsikata said the purpose of the devaluation is to strike a balance between exports and imports because a country cannot undervalue its imports.

“Imports were growing much faster than exports and the country’s ability to pay for imports was declining. Enterprises and traders had lost access to credit lines because they couldn’t generate enough forex for imports,” said Tsikata.

He said Malawians should brace for tougher economic times ahead, before economic recovery.