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Home Business Business News

Malawi economy stuck for 40 years—economist

by Dumbani Mzale
08/01/2021
in Business News, Editors Pick
4 min read
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Economics associate professor Ronald Mangani has attributed Malawi’s economic stagnation for the past 40 years to neo-liberal policies advanced by the country’s key development partners and Western countries.

Mangani, who teaches economics at Chancellor College (Chanco), a constituent college of the University of Malawi and served as Secretary to the Treasury between 2014 and 2017, said neo-liberal policies are “tragic to the Malawi economy”, advising authorities to start interrogating and questioning the effectiveness of such policies.

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Mangani: The success of neo-liberalism is its failure

Neo-liberalism refers to market-oriented reform policies such as eliminating price controls, deregulating capital markets, lowering trade barriers and reducing government control, especially through privatisation, austerity and State influence in the economy.

In his lecture titled The Quest for a Pragmatic Economic Management Framework in Malawi delivered at Chanco in Zomba on Tuesday, he said: “Malawi is stuck ‘in the short-run’ for now 40 years despite the country receiving a lot of financing facilities from its donors in form of the International Monetary Fund Exogenous Shocks Facility, Extended Credit Facility as well as the current Rapid Credit Facility, among other financing modalities.”

Mangani, who once sat on the Monetary Policy Committee of the Reserve Bank of Malawi (RBM), said between mid-1970s and 1980, the country’s real gross domestic product (GDP) averaged 6.1 percent, but between 1982 and to date, real GDP has only averaged 3.6 percent.

Development economists argue that growing at an average of 6.1 percent, the country can move 50 percent of its population out of poverty trap, and this explains why Malawi’s poverty is still endemic.

Ironically, the country’s expired Vision 2020 had envisaged an average growth rate of six percent over its implementation period, but that was not achieved.

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

But Mangani said such policies have only deepened aid dependence, bluntly saying “Malawi is an obedient patient of neo-liberalism that cannot recover”.

He said: “The success of neoliberalism is its failure. I call it tragic neo-liberalism 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.”

Mangani 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.

On her part, renowned feminist and former legislator Jessie Kabwila also faulted neo-liberalism, saying its doctrines are purely patriarchal in nature and do not favour women and girls.

She said: “If you want to destroy neo-liberalism, you need to have more women in decision-making.

“The majority of the poor in the country are also women and neo-liberalisation benefits patriarchal dividends and it doesn’t deliver to women and youths.”

Reacting to the lecture, Chikumbutso Ngosi, ActionAid Malawi women and girls rights specialist said realising the oppressive systems that have been associated with ‘imposed’ macroeconomic policies, the Feminist Macro Economics Alliance-Malawi has recently championed the engendering of feminist lens in the formulation of macroeconomic policies.

“Through a study, it was revealed that broader macroeconomic policy formulation does not consider gender difference or feminist approach in the economic analysis and this is feared for the likelihood of exacerbating in equalities,” she said.

In an attempt to turn around the current status quo, government is banking on the newly-formulated Malawi 2063, a successor of Vision 2020, expected to be launched on January 19.

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