A development expert says Malawi’s private sector has remained dormant because of the underdeveloped public infrastructure that is failing to facilitate desired growth.
According to the researcher and development expert Paul Kwengwere, the underdeveloped public infrastructure is hugely attributed to the low development budget allocation coupled with poor absorption rate in project implementation.
Writing in his paper titled: Infrastructure Investment Uncertainty: Malawi’s Weakest Link in Achieving High Economic Growth, Kwengwere argues that public infrastructure increases the marginal productivity of private inputs hence raising the perceived rate of return for private sector.
Kwengwre says that low developmental budget allocations have made Malawi fail to maximise on its infrastructure needs to facilitate private sector growth as mostly the development budget is dominated by donor support.
He said: “It is not only foreign resources that reduce outturn. Sometimes even the local resources budgeted for are not released or realised. Public infrastructure increases the marginal productivity of private inputs hence raising the perceived rate of return for private sector.
“With poor capital investment planning, Malawi continues facing challenges in the strategic infrastructure development such as transport, communication and energy.”
For instance he cited insufficient power that goes below 50 percent demand capacity which makes it almost impossible for new factories to be productive, let alone to grow, thereby affecting economic growth.
In the paper, Kwengwere argues that government needs to put protective measures for the development expenditure so that once it is approved, the implementation should not at any point be deterred.
Further, he stated that the development expenditure is too important to be just left to foreign financing as such there is need for increased allocation of the local and more predictable resources.
Over the years, there have been persistent gaps between budget and expenditure for instance in 2018/19 budget, out of the K335 billion approved budget only K281 billion was utilised representing an almost 20 percent drop.
In the 2019/20 budget, out of revised K1.84 trillion, K1.4 trillion will be spent on emoluments and Other Recurrent Transactions leaving only K470 billion for development projects. The K470 billion earmarked for development projects, K333 billion is foreign financed and domestically financed projects amount only to K137 billion.
President Peter Mutharika has been proclaiming that his government wants the economy to become private sector led by supporting the growth of the private sector through creation of conducive operating environment. n