By Ed Stoddard and Mabvuto Banda LILONGWE (Reuters) - Malawi should see economic growth pick up to more than 4 percent in 2016 from about 3 percent last year as the country recovers from a drought caused by the El Nino weather pattern, its finance minister said. Agriculture accounts for almost a third of Malawi's economy and provides the livelihood of 80 percent of the population. Last year, the country suffered floods, then a drought that has hit production of the maize crop across southern Africa. "We don’t think the weather will be as bad this year as last. Growth could be higher than 4 percent in 2016," Goodall Gondwe told Reuters in an interview late Monday. Malawi's central bank in September was forecasting growth of 5.4 percent in 2015 and 6.5 percent in 2016 after a 6.0 percent expansion in 2014, but the weather has cast doubt on those forecasts. The International Monetary Fund said in September 2015 growth would slow to 3 percent. Impoverished and land-locked Malawi must also contend with a collapsing currency. The kwacha has been laid low by a loss of donor funds, falling export revenue from the key crop, tobacco, and a general loss of faith in African currencies as commodity prices fall. Since the government of President Peter Mutharika assumed office in May of 2014, the kwacha has fallen more than 300 percent, to 715 to the dollar from around 160. Combined with a poor maize harvest, the weakening kwacha has pushed inflation to 25 percent from 18 percent in March last year, with accelerating food prices heaping misery on lower-income households. The United Nations World Food Programme reckons about 2.8 million Malawians, 16 percent of the population, face hunger. But Gondwe said black market rates - often a useful exchange rate gauge in poor, developing economies - indicated the kwacha's decline was nearing its end. "We think the kwacha will stabilise this week or next week," he said. "If you go to the black market area you will find that the difference between the black market rate and the official rate is not much. Which means that it has reached its equilibrium." DONOR FUNDS Malawi is also grappling with a loss of donor funds to support its budget in the wake of a scandal over two years ago dubbed "cashgate" in the local press. Led by Britain, Malawi's former colonial ruler, donors withheld direct aid to the southern African nation over the scandal in which top government officials siphoned millions of dollars from the public purse. Donor aid has usually accounted for 40 percent of Malawi's budget. In 2012/13, before "cashgate" erupted, the government got $550 million in grants, equivalent to about 14.4 percent of gross domestic product. It fell by $360 million to $190 million the following year. It has not reached pre-scandal flows since then. "That is a policy which we must accept. We have seen the last of budgetary support from bilateral governments," Gondwe said. Donor aid has not completely dried up but now by-passes the budgetary process. "It is not passed through us," Gondwe said. "The money will be passed to the account of a commercial bank and they will take that money and buy things that we want and say ‘here it is.’” He said the government was tightening its belt and civil servant wage increases this year would not be "too liberal", but big job cuts were not planned. "Things like traveling we have cut very severely," he said. "The luxury of having free cars and things like that, we will have to cut." (Editing by James Macharia, Larry King)