Vice-President Saulos Chilima yesterday unveiled a five-point plan which the Tonse Alliance administration believes could help to rejuvenate the economy in the wake of Covid-19 pandemic.
The five-point plan entails resolving infrastructure deficits, clearing private sector arrears, arresting growth in public debt stock, eliminating fiscal pressures arising from State-owned enterprises and broadening the tax-base by formalising the informal sector.
Speaking when he opened the 2020 Economics Association of Malawi (Ecama) Annual Lakeshore Conference in Mangochi, the Veep, who is also Minister of Economic Planning and Development; and Public Sector Reforms, said the country’s development challenges, to a large extent, emanate from lack or underdeveloped infrastructure.
Chilima told the conference of top economists and others that the country’s infrastructural deficits can be addressed by accessing huge amounts of money under long-term financial arrangements.
On this, he said government is implementing a two-pronged strategy that includes issuing a local currency development bond to clear backlog of development projects and finance newer strategic projects that cannot be funded through the national budget.
Chilima also disclosed that government is currently exploring the scope for issuing a foreign currency- denominated development bond or Euro bond, observing that a favourable rating will enable the country and its companies raise cheaper capital on the international financial market and send positive signals to foreign direct investors.
On clearing public sector payment arrears currently hovering at around K250 billion or 11 percent of the K2.2 trillion 2020/21 National Budget, he explained that government recognises that the economy can be rejuvenated by the private sector.
“This injection will both relieve liquidity constraints that companies are facing and also jump-start the economy,” he said.
On curbing growth in public debt stock, currently at K4.1 trillion or 65 percent of gross domestic product as at June 2020, Chilima said government will create a debt retirement fund, through the introduction of a levy on some products with inelastic demand whose proceed will be ring-fenced and used entirely for that purpose.
Speaking earlier, Reserve Bank of Malawi Governor Wilson Banda, who is also chairperson of the Ecama Board of Trustees, said the annual conference is happening at a time the country is in dire need of practical solutions to solve the challenges facing the economy in the wake of Covid-19 pandemic, which has subdued the country’s growth forecast for 2020 and beyond.