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Malawi to grow 6.9 pct this year, accept less aid
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3 June 2011
LILONGWE (Reuters) - Malawi's economy will grow 6.9 percent this year and 6.6 percent in 2012, allowing the southern African country to weather a hefty decline in foreign aid, Finance Minister Ken Kandodo said in his budget on Friday.
'These growth rates are expected to be anchored by strong performance in the agriculture sector as it rebounds, as well as mining and construction,' Kandodo told parliament.
Malawi's economy grew by 6.7 percent in 2010. Inflation, which slowed to 7.1 percent year-on-year in April, is forecast to decline to 7.0 percent this year and 6.9 percent in 2012, he added.
Foreign aid had accounted for 30 percent of all government receipts last year, compared to 21 percent projected for this year under a zero deficit budget designed to get the country paying for all recurring expenses, such as civil servants' wages, out of its own pocket.
Kandodo's speech made no mention of a decision by Britain, Malawi's single largest donor, to suspend aid worth $550 million over the next four years due to a diplomatic spat between London and Lilongwe.
The argument stems from a leaked British diplomatic cable that referred to President Bingu wa Mutharika as 'autocratic and intolerant of criticism'.
Kandodo said Malawi would continue to need donor support, but it would be channelled towards development projects rather than the day-to-day costs of running the country.
The donor freeze—other countries are said to be considering following Britain's example—has prompted fears of a dollar supply crunch in the country, putting pressure on the Malawian kwacha's exchange rate.
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Global Good News comment:
Global Good News feels it is unfortunate the leaked British diplomatic cable has caused a rift in the relations between Britain and Malawi. Global Good News sees Malawi's potential growth as offsetting the loss of aid from Britain as a positive trend, and it is hoped the relations with the two countries are soon mended.
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