Malawi, which is still recovering from the shocks of Cashgate has yet again slipped on global economic transformation index to 90 out of 129 economies in 2016 from 82 in 2015, according to a Bertelsmann Stiftung’s Transformation Index (BTI) released this week.
The 2016 BTI Malawi Country Report indicates that for the past three years, the country has failed to make economic transformation gains.
This, however, is happening at a time Mozambique (raked 83) and Zambia (ranked 77) are improving the lives and welfare of the people and have recorded improved performance, according to BTI.
While Zimbabwe ranked 115 is still struggling to transform its economy.
In an interview yesterday, Treasury spokesperson Nations Msowoya said Malawi has been through some economic difficulties arising from shocks of floods; drought and withdrawal of budgetary aid; hence, the poor rating.
Donors, who collectively contribute about 40 percent of the recurrent budget, suspended their direct budget support (DBS) and continue to demand the strengthening of public finance management (PFM) system, among others.
“The transformation index measures historical performance and as you are aware the past period is when Malawi has been passing through some economic difficulties arising from shocks of floods, drought and withdrawal of budgetary aid.
“As such, government could not invest in any new transformative projects,” said Msowoya.
Currently, government has also suspended some projects due to budgetary constraints.
When presenting the Mid-year Budget Review in Parliament last month, Minister of Finance, Economic Planning and Development Goodall Gondwe said he slashed budgets for some ‘low impact’ projects, to reduce expenditure in the poorly performing 2015/16 National Budget which has since been revised downwards by K23 billion (about $34.5million) from K929 billion (about $1.4billlion) to K906 billion (about $1.36billion).
But Malawi Economic Justice Network executive director Dalitso Kubalasa feared that suspension of development projects threatens to affect some people and economic growth projections and expectations depending on the rationale used to select such low impact projects.
He urged government to intensify economic transformation efforts once the economy stabilises.
According to BTI report, Malawi’s level of social economic development, organisation of market competition and anti-inflation/forex policy performance remains poor while liberalisation of foreign trade, the banking system and private enterprises registered good performance in the year under review.
“The independence of the Reserve Bank of Malawi [RBM] remains debatable given that the President appoints the governor and the two deputies. In fact, the trend has been that any change in the political leadership has resulted in changes in the central bank’s top leadership,” reads the report in part.
The report also says that Malawi has failed to address the gap between the rich and the poor.
The BTI measures and compares transition processes in 129 transformation countries with data collected between 2013 and 2015. The global ratings are based on detailed country reports. n