The Reserve Bank of Malawi (RBM) has stood by medium term economic growth and inflation targets albeit conceding that the economy is facing various risks that could threaten financial stability.

In its February 2022 Monetary Policy Report, the central bank outlines elevated maize prices, pass-through of exchange rate depreciation, continued pressures on energy prices, high imported inflation following the rebound in global commodity prices and sustained fiscal budget deficits among the threats facing the economy.

RBM—whose mandates include supporting the economy through convenient monitory policies— says in the report that amid the risks, it remains committed to achieving its set out targets.

“The RBM remains committed to the medium-term inflation objective of 5.0 percent with a symmetric band of 2.0 percentage points and that the domestic economy to grow by 4.1 percent in 2022,” the report reads.

Last year, inflation averaged 10.8, which was the first time to hit double digit in more than two years, energy prices remained on an upward spiral and budget deficit was seen at 8.8 percent of the country’s gross domestic product.

The staggering economic performance stemmed from the effects of the Covid pandemic but the pressure was, to an extent, contained by a bumper harvest in the 2020-21 agricultural season, thanks to the revamped Affordable Inputs Programme.

Commenting on the outlook, Economics Association of Malawi (Ecama) Executive Director Frank Chikuta said although the economic performance is surrounded by huge risks, the projections are attainable.

Chikuta said although prospects of economic output might not be clearer as the government is yet to outline fiscal policies in the national budget, meeting the inflation target would be dependent on agricultural output.

“The attainability of these targets will depend on the short-term policy measures which the government is going to implement because, once we have a good harvest, the targets are likely to be achieved,” he said.

In the State of the Nation Address, President Lazarus Chakwera said the primary budget deficit incurred during the financial year ending March 31 2022 is projected to decline from 8.8 percent of GDP in the 2020-21 Financial Year to 7.3 percent.

“Though the decline is moderate, it does signal my administration’s intentions to reduce the rate of borrowing and effect stringent measures to control public spending,” he said.

Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.

He is however flexible as he also writes about current affairs and national issues.

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