The African Development Bank (AfDB) says persistent adverse weather shocks in the country could lead to hyperinflation, escalating debt ratios and reduced economic growth if not well managed.
In its July 2019 Working Paper Series for Malawi, AfDB said the country’s economy could contract by two percentage points in the next five years due to the relatively large share of the mainly rain-fed agriculture in the gross domestic product (GDP).
The pan-African bank said adverse weather shocks could also potentially lead to hyperinflation of up to 30 percent.
“Malawi’s development progress over the past three decades has been influenced by a combination of structural, institutional and political factors that have been extensively documented elsewhere.
“In particular, the economy is not sufficiently diversified and is highly dependent on rain-fed agriculture, a major source of vulnerability and a possible impediment to the attainment of Malawi’s growth and development prospects,” reads the analysis in part.
Agriculture accounts for about 30 percent of GDP, generates over 80 percent of export earnings and employs 64 percent of the country’s workforce.
At the same time, agriculture contributes to food and nutrition security, according to the Japan International Cooperation Agency (Jica) Agriculture Sector Position Paper.
The sector is driven by several policy documents and strategies which include the Malawi Growth and Development Strategy III, National Agriculture Policy, National Agricultural Investment Plan (Naip), the National Irrigation Policy, National Irrigation Master Plan and Investment Framework.
According to Naip, despite the high dependence of the economy on agriculture, commercialisation of the sector is limited, with the average added value per agricultural worker during 2005/12 amounting to $209 (about K154 660), far below the sub-Saharan Africa average of $680 (K503 200).
Naip observes that while the country registers good rainfall levels in average years and has substantial surface water resources, Malawi’s irrigation potential is estimated at 408 000 hectares (ha) of which 107 000 ha (26 percent) has been developed with about 46 percent on estates and 54 percent smallholder.
In an interview on Saturday, agricultural expert Tamani Nkhono-Mvula observed that little commercialisation makes the agriculture sector less resilient in the face of weather-related shocks.
“There is enough evidence that all the slumps in the economy since 1964 have followed a bad weather season.
“Programmes like the Shire Valley Transformation Programme and the Agriculture Commercialisation Programme provide hope, but we have had such programmes before that never yielded anything,” he said.
According to Ministry of Agriculture, Irrigation and Water Development, public spending in agriculture sector has traditionally been high in Malawi, averaging 16.3 percent of the total budget between 2007/8 and 2011/12, far above the Comprehensive Africa Agriculture Development Programme (Caadp) Maputo target of 10 percent.