Economics Association of Malawi (Ecama) has projected that 2015 will be gloomy economically as most of the challenges faced in 2014 will likely spill over to next year.
The year 2014 is ending with a number of challenges, including industrial strikes and uncertainty as to whether development partners will resume budgetary support suspended in November 2013 due to Cashgate—the looting of public funds at Capital Hill.
Responding to an e-mailed questionnaire, president of Ecama Henry Kachaje said the industrial strikes in the Judiciary, Anti-Corruption Bureau (ACB) and the academia will further cast a dark cloud over the economy.
“Donors have explicitly said that they will only reconsider giving budgetary support if there is no speedy dealing of the Cashgate cases and strengthening of the public financial management systems.
“Unfortunately, with the ongoing strikes in the Judiciary and ACB, there is no hope that the donor conditions will be met within the first or second quarter of 2015,” Kachaje lamented.
He said if the demands for higher wages are awarded to the various striking groups, which might include those in the health sector, then this might fuel higher inflation, which will further weaken the economy.
Kachaje said there might be more pressure on foreign currency as the agriculture sector continues to buy farm inputs, which could lead to a further depreciation of the kwacha.
However, he said there is a ray of hope for the country’s economy if the leadership deals decisively to resolve labour strikes in the public sector and negotiate with striking staff to ensure that any increments offered should not throw the budget off-balance.
Kachaje urged government to ensure prudent fiscal discipline that must lead to lower inflation to single digits, lowering of the interest rates to below 30 percent, speedy handling of the Cashgate cases to ensure that the country restores donor confidence, diversification of the economy that will result in broadening of the export base, import substitution and job creation.
Assessing 2014, he said the year was challenging economically as the kwacha depreciated significantly and lost more than a quarter of its value against the dollar since September 2014.
“The massive loss of value of the kwacha also made it tough for those operating businesses that are heavily dependent on imported goods and raw materials because within a very short period of time, their cost of production and operating costs rose significantly by at least 80 percent.”
“Businesses also suffered very much as most government payments were halted and those that had genuinely supplied goods and services to government could not be paid and some have not been paid up to now.
“This negatively affected the operating cash flow of many businesses. It must be appreciated that government still remains the biggest consumer of goods and services,” he said.
In the 2014/15 budget, Minister of Finance, Economic Planning and Development Goodall Gondwe said government owed the private sector K158 billion in arrears.
But Gondwe said government will issue zero coupon bonds to contractors and suppliers, tol enable those owed to discount the bonds with commercial banks. n