IMF Chief Urges Malawi to Diversify Economy

{{IMF boss Christine Lagarde has urged Malawi to diversify its economy, saying a reliance on agriculture left the country’s economic recovery Vulnerable.}}

“Agriculture still accounts for 30 percent of GDP and tobacco still accounts for almost half of total export earnings,” Lagarde said in prepared remarks on the second day of an official visit.

“What this means is that Malawi and its people are too vulnerable. Vulnerable to the forces of nature. Vulnerable to the vagaries of global commodity markets. Vulnerable to people slipping back and forth between poverty and just getting by.”

Lagarde praised reforms introduced by Banda and her government which she said had restored stability after inheriting a crisis characterised by foreign exchange shortages that crippled key imports such as fuel.

After taking office last April, Banda has overseen the devaluation of the kwacha currency by 50 percent, the easing of foreign exchange restrictions, and the raising of fuel prices and cutting of subsidies.

“Following these reforms, the economic wheels started spinning again,” said Lagarde, the International Monetary Fund managing director.

“But progress is threatened anew by a slump in agriculture — from a weather-related decline in maize production and a halving of the tobacco crop brought about by lower planting during the period of overvaluation.”

The fund has halved its 2012 growth forecast for the impoverished nation to around two percent but predicts a rate of 5.5 percent this year.

The country’s economic recovery plan set a foundation for improved growth, said Lagarde.