Rich-poor gap widens

Parliament’s Budget and Finance Committee has bemoaned the glaring income inequalities in Malawi, warning that the situation is a potential recipe for conflict between the rich and the poor if not managed properly.

Committee chairperson Sosten Gwengwe sounded the warning shot on Monday in Washington DC, United States of America (USA) on the sidelines of a 2019 Joint Annual Meeting by the World Bank and the International Monetary Fund (IMF).

The legislator, who is part of the Malawi delegation participating in various discussions at the annual assembly of the Bretton Woods institutions, took part in the Global Parliamentary Workshop hosted by the Parliamentary Network on the World Bank and IMF, a forum which pooled together influential parliamentarians from across the globe to exchange with senior management and experts from the two institutions on development and economic issues around the theme of Inequalities.

In an interview after the meeting, Gwengwe said he was at pains to highlight the continued worsening gap between the rich and the poor in Malawi.

He said: “Income inequality erodes social cohesion in society and this is a potential source of conflict between the haves and have nots [the rich and the poor] if not managed properly.”

In Malawi, wealth inequality as measured by a generic measure called Gini-coefficient has worsened over the past years, according to recent studies. Gini-coefficient refers to the distribution of money across a nation, State or specific geographic region.

If a country has a Gini-coefficient of zero, it means that the country has perfect equality in terms of distribution of wealth among its citizens while the opposite holds true if a country’s Gini-coefficient is positive one, meaning that the country has high inequality such that the national income is shared by only a few elites.

Data from National Statistical Office (NSO) shows that Malawi’s Gini-coefficient has moved from 38 percent as established in the Integrated Household Survey (IHS3) conducted in 2010/11 to 41.4 percent based on the IHS4 conducted in 2016/17.

On the other hand, the World Bank puts Malawi’s Gini-coefficient at 46.1 percent as of this year, signalling the continued widening of the gap between the rich and the poor.

Gwengwe said: “Solving inequalities cannot work with blanket solutions. IMF and World Bank should help fund specific interventions for specific countries. Emphasising global value chains vis-à-vis globalisation leaves out countries such as Malawi whose value addition drive is still infant.”

On possible policy recommendations to address the vice, the legislator, who has previously served as a Cabinet minister, said programmes such as the social cash transfer should be encouraged while also allowing policy flexibility in African countries by institutions such as the IMF and the World Bank.

He said: “Policy tools dealing with inequality can include international trade, taxation, managing public debt and labour laws, among others.”

In an e-mail response on the same, Economics Association of Malawi (Ecama) executive director Maleka Thula yesterday said that recent statistics show that income inequality has worsened in the country compared to five years ago.

He said: “This means that the [economic] growth that we have registered as a country over the past five years has only benefited the few while the majority have become even poorer.

“It is not even surprising to see that poverty has increased in the same period. There is a need therefore for authorities to come up with policies such as social cash transfers that will ensure that resources are distributed to benefit the less privileged.”

In a separate interview, Catholic University of Malawi dean of social sciences Gilbert Kachamba explained that the increasing inequality between the rich and the poor is dangerous to the economy as it leads to low investment in health and education by the poor, thereby promoting poverty.

He shared Gwengwe’s sentiments that the rising gap between the rich and the poor in Malawi leads to social conflicts while also

culminating into low aggregate demand for goods and services and hence slow economic growth.

“The efforts are there, but the absorption of those efforts by the masses is what is lacking, rendering the efforts ineffective,” said Kachamba.

A recent report by Oxfam Malawi titled A Dangerous Divide: The State of Inequality in Malawi established that economic inequality has worsened significantly in the country.

The report, among others, pointed out that in 2004 the richest 10 percent of Malawians consumed 22 times more than the poorest 10 percent. However, by 2011 the richest 10 percent was spending 34 times more than the poorest