Government has K8TN Toilet flush

Government has over the past 10 years spent K8 trillion—equivalent to the nominal size of the Malawi economy—an outturn that a Weekend Nation analysis has found largely worsened Malawians’ well-being.

Malawians earn much less today than they did 10 years ago—and have become poorer over the decade and live in a society that is nearly as unequal as a decade earlier—our examination of key indicators show.

Figures from the National Statistics Office (NSO) illustrate that individual earnings, or per capita incomes, have shrunk by around six percent to $412 in 2019 from $438 in 2009.

On average, per capita income has stood at $441 over the period, well below the $1 000 that the expired Vision 2020 envisioned for Malawi by this year.

Malawi’s neighbours are way ahead, with average incomes at $1 600 in Tanzania and $1 090 for Zambia.

Not surprisingly, poverty, too, has become more pervasive in Malawi over the decade despite what on paper and in political rhetoric has been touted as a poverty-centric budget spending agenda.

Economic experts we spoke to on this trend said the low per capita gross domestic product (GDP)—derived from dividing the country’s nominal GDP by its population size—is symptomatic of a country’s wealth not increasing with the same pace or not fast enough against its population.

And that begets high poverty levels.

Integrated Household Surveys (IHSs) over the period confirm that the proportion of population living under the poverty line increased from 50.7 percent in 2010 to 51.5 percent in 2016 and 51.7 in 2018.

Meanwhile, a disproportionate number of those who were poor 10 years ago have become poorer while the converse is true for those who were rich in 2009 as income inequality as measured by the gini-coefficient widened from 0.39 in 2010 to 0.43 in 2016.

A gini-coefficient that is closer to zero expresses perfect equality where everyone has the same income. This is unlike a coefficient of closer to one, which shows perfect inequality as it exemplifies unequal distribution of wealth and income.

The share of income held by the richest 20 percent in Malawi was 51.8 percent in 2010 and slightly declined to 51.7 percent in 2016.

On the other hand, the share of income held by the poorest 20 percent of the population was 5.5 percent in 2010 and marginally increased to 6.4 percent by 2016.

This data has prompted economist Gowokani Chijere-Chirwa to conclude that all the budgets under the 10-year spell—presided over by three presidents—Bingu wa Mutharika, Joyce Banda and Peter Mutharika—have failed to tackle poverty and inequality.

“Poverty and inequalities are both deep-rooted and entrenched in our societies today,” he said.

The disappointing returns on the K8 trillion investment also manifest in the weak economic growth rates. GDP growth rates have averaged around 4.5 percent between 2009 and 2019—which is below the six percent mark that development practitioners and government agree is the expansion pace Malawi needs to have a real chance of improving the lives of its people.

Poor showing on indices

We zeroed in on two indices—the legatum Prosperity Index and Human Development Index (HDI) to gauge how Malawians have faired—which also confirms that Malawians are struggling hard.

The legatum index analyses 167 countries around the world on 12 different measures of prosperity—from economic metrics to safety and security, social capital, health, education, and living conditions.

The index helps countries assess their strengths and weaknesses to determine the economic and strategic choices that needed to be made to further build inclusive societies, open economies, and empowered people to drive greater levels of prosperity.

Under the legatum index, the country has worsened from position 124 in 2009 to 126 in 2018.

In terms of HDI, while the United Nations Development Programme managed index says expectancy has improved from 39 years at independence in 1964 to an estimated 63 years to date, Malawi’s HDI—at 0.485 is too close to the bottom (0.550) for a country that has enjoyed peace since its independence.

What went wrong?

Chancellor College economics professor Ronald Mangani, speaking during the recent 2020 Annual Lakeshore Conference of the Economics Association of Malawi (Ecama), blamed the country’s economic woes and underdevelopment on multiple factors, including lack of the  economic independence, and neoliberalism, which he said is bent towards weakening the weak while strengthening the strong.

Said Mangani, a former Secretary to the Treasury under Peter Mutharika: “The success of neoliberalism is its failure. I call it tragic neoliberalism and the justification was to address structural economic weaknesses and create resilience to shocks from the economic crisis of the late 1970s through comprehensive policy reforms dangled in return for Western aid since 1981.”

Between 1981 and 1994 Malawi adopted Structural Adjustment Programmes (SAPs) aimed at addressing balance of payments (BoP) and fiscal deficit challenges before embarking on Fiscal Restructuring and Deregulation Programmes (FRDPs) as well as enhanced SAPs between 1995 and 2000 to address the same BoP and fiscal deficit woes.

In 2000 and beyond, the country adopted Poverty Reduction Strategy Programme (PRSP) to reduce poverty through macro-economic stability.

But Mangani said such policies have only deepened aid dependence in Malawi, telling the conference that “Malawi is an obedient patient of neoliberalism that cannot recover”.

He said in Malawi, expansionary fiscal policy—which involves tax cuts, transfer payments, rebates and also increased government expenditure—is ineffective, contrary to Keynesian economics—propounded by John Menard Keynes in 1936, which entails that increased government expenditure and lowering of taxes help stimulate demand and pull the economy out of depression.

According to Mangani, Malawi is getting poorer by design, stressing that both the implementation of input subsidies or social cash transfers is an admission that neoliberalism policies are not working for the poor.

On an interesting note, he also said agriculture and industry are currently collapsing while the country is busy specializing in vending—again, “by design”.

But some experts, such as Centre for Research and Consultancy executive director Milward Tobias, feel the reason is that Malawi’s national budgets are too small and often implementing agencies receive less than their approved budgets; hence, not enough to meaningfully make an impact.

“The result (low budgets) is either more borrowing than planned; accumulation of arrears or some planned activities not implemented,” he lamented.

He added: “There are serious inefficiencies too in the fiscus. However, the most disturbing challenges are the persistent drive to do right things in a wrong way; the persistent focus on means to ends rather than ends.”

Silver lining

But all is not lost, with the World Bank saying although Malawi continues to face several economic challenges; the country is already forging a new pathway in a number of areas.

“I have been impressed by the sense of urgency and the sense of purpose.

“There is clearly a long road to recovery—but the tone from the top is action-oriented. This will be key,” says World Bank country manager Hugh Riddell, in an apparent reference to the Lazarus Chakwera-led Tonse Alliance administration’s signals—at least in speeches—that it wants to handle things differently.