By Mabvuto Banda
LILONGWE May 22 (Reuters) – Declining fuel prices and a narrowing budget deficit in Malawi will help its economy grow, despite a fall in donor grants, the finance minister said in a budget speech on Friday.
Foreign aid has traditionally accounted for about 40 percent of Malawi’s national budget, but a scandal involving donor funds now threatens to deplete its scant revenues.
“There is a decline in total revenue and grants in the 2015/16 as a share of GDP (gross domestic product) entirely due to the continued decrease in donor grants,” Goodall Gondwe told parliament.
Total revenue and grants were expected to decline to 97.1 billion Malawian kwacha ($226 million) from 132.8 billion Malawian kwacha ($309 million) previously, the minister said.
Gondwe said he expected inflation to slow to 18.2 percent in April 2015 from 24.4 percent in November 2014, due mainly to the fall in global fuel prices, which would also support the kwacha.
“The better growth trend that was being achieved this year was disturbed by … floods and dry spells, which have adversely affected the agricultural sector,” Gondwe said.
Days of torrential rains in January killed at least 48 people and left around 70,000 homeless, also damaging maize crops, a major export.
Despite the setbacks, the finance ministry said it projected real economic growth at 7 percent in 2015/16. ($1 = 430.3500 kwacha)