Malawi Kwacha to depreciate, says African Development Bank

The  African Development Bank (AfDB) has warned that the local currency, Kwacha, will mdepreciate by about five percent partly because of expected large current account deficits.

According to the AfDB 2019 Southern African Regional Economic Outlook, the growth of about 4.6 percent which Malawi is expected to register  will will depend on improvements in rain fed agriculture, macroeconomic management and fundamentals, recovery in global demand and commodity prices, and reforms enhancing foreign direct investment.

The reports says   although all currencies are expected to depreciate for various reasons, changes are moderate.

“Only Malawi’s will change more than five percent, while Angola’s has been deliberately depreciated to reduce misalignments. The relatively large depreciations in Angola, Malawi, and Mozambique in 2019 will partly be caused by expected large current account deficits,” reads the report in part.

With growth projected at 4.6 percent and inflation at 7.7 percent, the bank said fiscal reforms which include reducing the relatively high borrowing and budget deficit, repealing the industrial rebate scheme, removing tax holidays, strengthening tax administration, and limiting nonessential recurrent spending, augmented by the Malawi Growth and Development Strategy (MGDS) III, favour a positive outlook.

“The economy continues to grow, while inflation remains on a declining trend. Over the medium to long-term, growth will be backed by improved electricity generation, better irrigation infrastructure and cropping techniques, greater access to finance, and a stronger business climate,” the bank predicts.

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