Minister of Economic Planning and Development Goodall Gondwe says Malawi and the rest of Southern African countries have been hard hit by falling commodity demand and prices as well as the El Nino phenomenon.
He said on Thursday in Lilongwe that this state of affairs has triggered rising unemployment and unprecedented food shortages in the rest of the region.
Malawi and other countries in Sub-Saharan Africa rely on exporting raw agricultural products, making them cheaper, and in a way, exporting jobs.
According to Gondwe, falling commodity prices have affected the macro economic outlook for Malawi and there is need to find solutions to counter the challenge.
He said: “Our macro economic situation has deteriorated markedly as a result of drought-induced inflation and also partly due to our fiscal policy responses as we raise deficit spending to replace diminished commodity revenues and to mitigate the impact on themost vulnerable segments of the population.
“In the ongoing crisis, our inflation is hovering above 20 percent, fiscal deficit is in the region of six percent of gross domestic product [GDP] and exchange rate has been depreciating.”
However, for the past weeks, the kwacha has been appreciating against major foreign currencies due to reduced demand of the hard cash and expectation of tobacco dollars, which will start trickling in early April.
The minister was speaking on the sidelines of a 22nd meeting of the intergovernmental committee of experts (ICE) of Southern Africa which was held on Thursday and Friday.
Gondwe said these declining trends are also affecting Malawi’s neighbours, adding that policymakers are being forced deploy policy responses that might invariably worsen matters in the short-term, but expected to induce long-lasting improvements in due course.
He said interest rates have risen to combat inflationary pressures and fiscal policy has been tightened because of slow economic growth and limited aid and remittance flows.
Gondwe said: “Not so long ago, our continent and the developing world were the envy of the world, raising global growth at a time the west was in recession. “Malawi, for example, has enjoyed annual growth rates of five percent up to 2014 and our sustained efforts on poverty eradication resulted in us making significant strides towards addressing some of the Millennium Development Goals (MDGs).”
Regional director of United Nations Economic Commission for Africa (Uneca) Said Adejumobi, who is based at the sub regional office for Southern Africa in Lusaka, concurred with Gondwe that Africa has over relied on raw commodities for a long time and it was high time the continent industrialised.
“Although Africa has recorded notable economic progress in the last 20 years with an average of about five percent GDP growth rate, which many of us have labeled the ‘Africa Rising’ story, but if we dig deeper into that story, industrialisation is not part of it.
“Africa’s growth has been powered by a boom in the commodity market, massive development in the telecommunication sector, especially mobile telephone industry and the growth of the service sector, but industrialisation is not part of the good news,” he explained.
The meeting’s theme was implementing the Sadc Industrialisation Strategy and Roadmap: Options and Prospects.