US tips Malawi on Middle-income status
The United States Government says no amount of development assistance can help Malawi to attain the middle-income status in the near future.
In its Integrated Country Strategy for Malawi published on www.state.gov, the US observes that for Malawi to graduate into the middle-income status, moving from aid to trade will be critical to support the economic growth necessary to support the country’s growing population.
Reads the country strategy in part: “Malawi has remained dependent on official development assistance for generations. Despite significant investment from the US Government and other partners, Malawi’s growth rate remains inadequate to population growth and comparators in the region.
“A new development modelled by private sector investment will be necessary to replicate the successes seen elsewhere.”
It says the country’s private sector is currently adding little to development, with agriculture accounting for more than 80 percent of the economy.
The US observes that while foreign direct investment could help expand and modernise the economy, there is need for equal opportunity access for both small and large investors.
Malawi has for a long time relied on development aid and credit to finance its development programmes.
FinMark Trust figures show that Malawi has lost five percent of the gross domestic product (GDP) or about $545 million (K414 billion) in donor funding since 2013 from over seven percent of GDP or $763 million (K579 billion) due to donor aid withdrawal because of Cashgate—the plunder of taxpayers’ money at Capital Hill.
However, in recent years, Treasury has found itself in a tight corner to shore up expenditure in the national budget by balancing with available resources in the wake of continued withdrawal of direct budget support and dwindling grants since Cashgate was uncovered.
Treasury figures show that Malawi’s national budget is skewed towards statutory expenditure, accounting for closer to 80 percent of the country’s total expense.
Although Malawi has improved its ranking on the World Bank Doing Business Index from 183 in 2011 to 109 in 2019, much of the economy is informal, which undermines the creation of a sufficient domestic tax revenue for public investments and limits employment options for Malawians.
Ironically, between 1994 and 2019, Malawi’s annual real GDP growth rates have averaged 4.3 percent, 2.7 percentage, which is shy of the needed seven percent to reach the lower middle- income status envisioned in the Vision 2020, which expired on December 31 2020, and is the predecessor of Malawi 2063.
Ministry of Economic Planning and Development Principal Secretary Winford Masanjala in an interview was upbeat that the Malawi 2063, which has three pillars, including agricultural productivity and commercialisation, industrialisation and urbanisation, would achieve the set targets.
“Presently, the aspiration of Malawians is that Malawi must industrialise. Talking about six percent, we are not saying that we will grow by six percent. We are saying we need to grow by six percent,” he said.
Through the National Planning Commission, the Malawi Government has outlined a number of projections for macroeconomic variables the country seeks to attain by 2063.
