Malawiâ€™s economic freedom score has gone up 0.6 percentage points to 56.4, making the countryâ€™s economy the 114thÂ freest out of 184 countries in the 2012 index.
Â This is according to the index prepared by the The Wall Street Journal and The Heritage Foundation, Washingtonâ€™s prominent think-tank, and tracks the march of economic freedom around the world with the influential Index of Economic Freedom.
It covers 10 freedoms from property rights to entrepreneurship in 184 economies.
The increase in the score, according to the index, is primarily reflecting modest improvements in the control of government spending and in freedom from corruption.
Malawi is ranked 18th out of 46 countries in the sub-Saharan Africa region, and its overall score is below the world average, according to the index.
â€œRelatively sound and consistent macroeconomic management has enabled Malawi to achieve annual economic growth of around seven percent over the past five years. However, such economic expansion remains fragile in the absence of a dynamic private sector. A tradition of direct government involvement in economic activity continues to crowd out private-sector development,â€ reads part of the indexâ€™s commentary.
Â It says, by and large, Malawi lags in competitiveness and promotion of the broad-based economic activity that is critical to the reduction of poverty.
The poor quality of physical as well as legal infrastructure, exacerbated by the governmentâ€™s inefficiency in delivering public goods, has been a serious impediment to long-term economic development, says the report.
Malawi is one of Africaâ€™s most densely populated countries with over 85 percent of the population depending on subsistence agriculture, according to the National Statistical Office (NSO).
The agricultural sector accounts for over 35 percent of Gross Domestic Product (GDP) and over 80 percent of exports with tobacco, tea and sugar as the countryâ€™s most important exports.
The report says that the inefficient legal framework in Malawi does not protect property rights effectively or strongly.
â€œCourt administration is weak, and due process can be very slow. There are reports of government intervention in some judicial cases and frequent allegations of bribery in civil and criminal cases.Â Corruption remains widespread, and there allegedly are serious problems in agencies handling customs, taxes, and procurement,â€ says the report.
It says progress in improving the inefficient business framework has been slow, adding that although burdensome labour regulations are not generally enforced, the labour market remains poorly developed.
Most of the population remains employed outside of the formal sector, primarily in agriculture.
It says the trade weighted average tariff rate is seven percent, with non-tariff barriers further hampering dynamic growth in trade, emphasising that both foreign and domestic investors are subject to government restrictions and heavy bureaucracy.