Malawi should tighten fiscal, monetary policy – Kandodo

malawi_ken_kandodoMalawis Finance Minister, Ken Kandodo (pictured) has called for the country to tighten fiscal and monetary policies and focus on reducing inflation.

According to a Reuters report on Tuesday, the countrys purse keeper urged the Reserve Bank of Malawi to boost its foreign reserves and contain the acceleration in money supply growth.

We are concerned with the low levels of foreign reserves (and) acceleration in money supply growth and this is the reason why it is essential that the Reserve Bank tightens both the fiscal and monetary policy stance if the goal of reserves accumulation is to be achieved, Kandodo said.

Finance Minister added: Our monetary policy must continue focusing on reducing inflation, providing sufficient liquidity to support economic activity while allowing for a gradual build up in the official reserves.

Kandodo projected inflation would average 9 percent for calendar year 2009.

Malawis headline inflation slowed to 8.0 percent year-on-year in June. Inflation in the southern African country has been on a downward trend since hitting a two-year peak of 10.1 percent year-on-year in January.

The latest Reserve Bank of Malawi monetary policy committee minutes show that as of mid-July 2009 foreign reserves declined to $109.9 million or 0.85 months of import cover.

Growth in broad money supply (M2) accelerated to by K8.1 billion (US$57 million) to K155.4 billion in June as net domestic assets and net foreign assets expanded by 5.1 percent and 21.0 percent, respectively.

Kandodo said private sector reserves tumbled in June by 17.9 percent to US$144.3 million.

During the same period monetary operations were expansionary and supplied liquidity to the market through discount window accommodation, which more than tripled from the previous months level to US$355 million.


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