The fiscal package in response to Covid-19 since January 2020 has been significantly lower in Malawi, World Bank figures have shown.
In its October 2021 African Pulse, the Bank estimates that Malawi has spent roughly about one percent of its gross domestic product (GDP) in response to the Covid-19 pandemic as at June 2021.
This is about $109 million or K89 billion.
Nominal GDP after rebasing is $10.9 billion (about K8.9 trillion).
At this rate, Malawi becomes the third country in the region with least spending, after Angola (0.9 percent of GDP) and Somalia (0.3 percent of GDP).
Reads the report in part: “The size of the fiscal support measures deployed by SSA [Sub-Sahara Africa] governments has been very small compared with those in advanced economies and emerging markets.
“The size of the stimulus masks the wide heterogeneity in budget support across African countries.”
For instance, the budgetary support to the economy in response to the pandemic since January 2020 amounted, on average, to 2.8 percent of GDP in SSA, while the average size of the stimulus represented 17.3 percent of GDP in advanced economies and 4.1 percent in emerging market economies, the report indicates.
Although the size of the fiscal support of all African countries was smaller than the average of advanced countries, in eight countries in the region, budget support measures exceeded 5 percent of GDP.
The fiscal measures deployed in Mauritius and the Seychelles, which are small island countries that are highly dependent on tourism activities, amounted to 9.2 and 6.6 percent of GDP, respectively.
In South Africa, the budget support in response to Covid-19 was nearly six percent.
Still, these packages paled in comparison with the amount of additional spending and forgone revenues in the United States (25.4 percent of GDP) and France (9.6 percent of GDP), as well as emerging markets such as Brazil (9.2 percent of GDP) and Thailand (11.4 percent of GDP), the report further notes.
The bank has since warned that with this insufficient fiscal support, countries in the SSA region have been growing below trend.
In an accompanying statement to the report, World Bank chief economist for Africa Albert Zeufack noted that fair and broad access to effective and safe Covid-19 vaccines is key to saving lives and strengthening Africa’s economic recovery.
“Faster vaccine deployment would accelerate the region’s growth to 5.1 percent in 2022 and 5.4 percent in 2023, as more containment measures are lifted, boosting consumption and investment,” he said.
The analysis shows that excluding South Africa and Nigeria, the rest of SSA is rebounding faster at a growth rate of 3.6 percent in 2021, with non-resource-rich countries such as Ivory Coast and Kenya expected to recover strongly at 6.2 and 5.0 percent, respectively.
Speaking earlier, Malawi Treasury spokesperson Williams Banda said the Covid-19 crisis is forcing government to borrow to meet some of its fiscal obligations—pushing up public debt.
Banda is on record as saying increased government expenditure in times of crisis is one fiscal policy that has been adopted by many governments to stimulate economic growth, “so what is government borrowing for and timing should be put in question”.
Currently, Malawi’s sovereign debt standing is at K4.8 trillion and the World Bank recently warned that a sudden rise in sovereign borrowing costs could instigate fiscal pressures on the economy.