Malawi - Money

Malawi's heavy trade imbalance is the source of its consistently high deficits and mounting debt. By the end of 1999 Malawi's total external debt stood at US$2.6 billion, a rise of 86 percent from the previous decade. Servicing this debt cost Malawi US$105 million in 1999, cutting drastically into the government's available funds for social services and development, and further widening the budget and balance-of-payments gaps. The instability that such over-runs cause in the Malawian economy has seen the value of the kwacha tumble and inflation soar. Riding at 45 percent in 1999, inflation is expected to remain above 30 percent until mid-2001, dropping to a hoped-for 15 percent by 2002. The kwacha is also expected to stabilize after a long period of freefall

since its floating in 1994. From around MK15 per U.S. dollar in 1995, the rate dropped to MK43 in 1998 and MK80 in 2000; forecasts are for around for MK106 in 2002. Reducing the deficit and attacking the debt are top priorities for the government.