It never rains, but pours for the Malawi economy which is literally in the intensive care unit gasping for recovery.
Barely one month into the implementation of the K2.8 trillion 2022/23 National Budget, macroeconomic indicators or statistics used to assess the health of an economy do not look promising.
Contrary to projections outlined in the budget, both inflation and interest rates are on the rise, economic growth rate has nose-dived from the estimated 4.1 percent with both the International Monetary Fund (IMF) and the World Bank slashing it by half.
There are several contributing factors, including the impact of the tropical cyclones, the Russia-Ukraine war that has disrupted global supply chains and the prolonged recovery from the economic effects of the Covid-19 pandemic.
Foreign exchange reserves continue to dwindle and the country’s green gold, tobacco is not fetching enough to salvage the situation. The absence of direct budgetary support from development partners who contributed about 30 percent to the recurrent budget and at least 85 percent to the development budget since September 2013 further complicated things.
Today, the dollar is so scarce such that even importation of drugs and medical supplies is not on the priority list for consideration, if the sentiments of pharmaceuticals expressed earlier this week are anything to go by.
Problems in the economy have been highlighted more than once. What is needed now is to decisively move into action. In case of foreign exchange, it is high time structural issues were revisited to identify other areas that can generate more foreign exchange. There have been plenty of opportunities to export agricultural produce and livestock, but sadly, it appears we are not well organised to benefit from the same.
Recently, we learnt that the IMF has committed to provide short and long-term recovery support to Malawi through a new economic programme aimed at boosting and stabilising the country’s economy to achieve growth.
Earlier this week, Minister of Finance and Economic Affairs Sosten Gwengwe said the Malawi Government is keeping fingers crossed for a return to the IMF’s Extended Credit Facility (ECF) to help realign some pressure points in the economy.
Ironically, in September 2020, Malawi willfully forfeited $70 million under the three-year ECF programme with the IMF after President Lazarus Chakwera’s administration, ushered in through a June 23 2020 court-sanctioned Fresh presidential Election, cancelled the arrangement to purportedly have a programme aligned to the long-term targets of the Malawi 2063 development strategy.
IMF country representative Farai Gwenhamo said at the time that the cancellation of the ECF arrangement meant that future disbursements under the remaining programme’s reviews will be cancelled. Through the ECF, the IMF provides financial assistance to countries such as Malawi, which have protracted balance of payment problems.
The benefits from the IMF programme may not be enough to seal the cracks in the economy. There is need for practical short to medium-term strategies to revive the economy from the deathbed.
Tough decisions should be made, including letting the kwacha attain its true value.
It is unfortunate that amid the economic mess, it is business as usual for our duty-bearers who continue to globe trot even to meetings that can be attended via virtual platforms or.
I do not want to be a prophet of doom, but what I foresee is that we will continue moving in circles in that after getting the IMF programme, the next big thing will be election fever gripping the nation. In fact, with the candidate endorsements and rallies in full swing, the campaign mode for 2025 has been activated! In the end, the economic programme wiIl be derailed and we will be back to square one.
Dare to do things differently to make a difference. In doing so, avoid the temptation to fix that which is not broken.