May 18, 2018 / 7:04 PM / a year ago

UPDATE 1-Malawi says World Bank, EU to unlock suspended budget aid

LILONGWE, May 18 (Reuters) - Malawi’s finance minister said on Friday that economic stability would unlock budget support from the country’s western donors which had been suspended over graft allegations.

Finance Minister Goodall Gondwe said that the county had achieved economic stability and attained the desired goal of the International Monetary Fund’s approval of a $112.3 million loan which in turn has helped unlock frozen aid.

“With inflation at 9.7 percent in April, interest rates are falling, the exchange rate has stabilised and foreign reserves have soared to a historical level, it means that the target of economic stability has been achieved,” Gondwe told parliament when presenting his 2018/19 budget.

Both the World Bank and the European Union suspended budget support in 2012 over a corruption scandal in which public servants siphoned off millions of dollars.

Last month the IMF approved a new three-year loan arrangement for Malawi to assist the southern African country’s economic and financial reforms.

The fund said that Malawi had shown progress in achieving macroeconomic stabilisation following two years of drought.

Gondwe said the country will now focus on robust economic growth as the main target and forecast the economy to expand by 4.1 percent this year, supported by more infrastructure investment and social spending.

The growth forecast compares with 5.1 percent in 2017.

“World Bank returned with budget support during the current financial year and it is due to disburse another one in the early part of the next financial year. It is also expected that the EU could approve budget support for Malawi in the course of 2018/19,” he said.

Malawi has a total public debt of $3.50 billion, with about a third of that in external debt. (Reporting by Mabvuto Banda Editing by Alexander Smith)

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