The third Malawi Growth and Development Strategy (MGDS III) is one ambitious document: it wants to maintain single-digit inflation at 7.1 percent and a growth rate of seven percent over the next five years between 2017 and 2022.
Built around the theme ‘Building a Productive, Competitive and Resilient Nation’ “that aims to improve productivity; turn the country into a competitive nation and develop resilience to shocks and hazards”, the blueprint also consolidates the efforts that Malawi is undertaking to reposition itself as a “global player”.
All these targets are achievable. Why not? Inflation is already in single digits currently, the economy is projected to expand by 5.5 percent this year—although that figure is debatable as the energy crisis deepens and is well below the 7.1 percent MGDS III benchmark.
The local currency, the kwacha, has been stable for most of the year, although I expect it to soften somewhat over the next three lean months as the current account shrinks and foreign direct investment remains tepid. But given the high import cover at four months, the kwacha may just be resilient enough and pull through the tough period with barely a scratch.
The commercial bank base lending rate—currently at an average of 27 percent—is likely to be steady for some time although sharp declines in inflation can trigger cuts to the policy that may drive down interest rates in general.
So, yes, the macroeconomic situation at the moment and general outlook has never been better, making it possible for the MGDS III to sound an optimistic tone.
But what will it take to sustain the gains and achieve the lofty targets in the strategic document that seeks better living standards for Malawians over the next five years?
First, government—especially the Ministry of Finance, Economic Planning and Development—should never underestimate the impact of insufficient power on the real sector.
It is the real sector that actually produces the goods and services that add real value to the economy, not just the trading that happens on the financial markets and some shops in Limbe or elsewhere across the country.
Lower productivity on account of power blackouts in the real sector will have an acute dampening effect on gross domestic product (GDP).
It is imperative, therefore, that authorities deal with the worsening power outages as a matter of priority, but in a more sustainable way than is currently the case. The expensive generator solution will not only push up operational costs for companies as electricity tariffs jump to meet the high cost of producing the additional 78 megawatts.
Second, there must be heavy investment in smart agriculture so that the country sustains high food output (crucial to maintaining low inflation levels) as well as high value cash crops for exports.
Of course, there also have to be comprehensive improvements in agricultural marketing systems for the country’s producers to make more money than is currently the case.
Third, the country must expand its export base and bring in more foreign currency to shore up our current account.
This should be looked at together with the ability to attract foreign direct investment, which should be easier now with the business reforms that have improved our ranking on the World Bank’s Doing Business Index (I am surprised that the Malawi Trade and Investment Centre) has not made noise internationally about this achievement.
For goodness’s sake, let the world know—through credible global media channels—that we are a better investment destination than several countries.
Fourth, we need to improve on our fiduciary management arrangements at all levels of government—from the central government to the local authorities.
We are still a long way from sealing loopholes in the public finance management and economic system and that is crucial.
This should also be seen in the same light as controlling our debt levels—both domestic and foreign—which are increasingly looking like they are cruising out of control.
The MGDS III cannot achieve much if it is saddled with huge debt overhung with expensive interest payments.
Firth, we need to take care of the health and education of our citizens because if the government continues to neglect these sectors, the goals of MGDS III could remain a pipe dream.
The list of what should be done is not exhaustive, but I think that these are some of the crucial elements that the strategic must walk the talk on. n