Grow economy not population

By Kingsley Jassi:

As Malawi’s pop­u­la­tion has been increas­ing rap­idly, while pro­ductiv­ity has been slow­ing down, the World Bank has urged author­it­ies to reverse the trend before it is too late. With pop­u­la­tion grow­ing at 2.6 per­cent annu­ally, the eco­nomy has struggled to hit 2 per­cent of late, mak­ing GDP per cap­ita to con­tract over a four-year period.

At the launch of the latest Malawi Eco­nomic Mon­itor ( MEM) in Lilongwe, a World Bank annual report that provides the bank’s eco­nomic ana­lysis, sev­eral testi­mon­ies from eco­nomic play­ers con­firmed the ground is slip­pery for pro­ductiv­ity, call­ing for urgent reverse. Exports are very min­imal, cov­er­ing just about 25 per­cent of the import cost and this has been weak­en­ing the struc­ture of the eco­nomy. But the report goes down to fun­da­mental issues affect­ing pro­ductiv­ity, cit­ing national budgets that have been sweep­ing resources from the fin­an­cial mar­ket, mak­ing the gov­ern­ment take up to 70 per­cent of credit.

Fin­an­cing budget defi­cits at over 10 per­cent of the GDP meant increas­ing money sup­ply, elev­at­ing infla­tion too high. This, in effect, has also neces­sit­ated the Reserve Bank of Malawi (RBM) to increase policy rates to the cur­rent 26 per­cent, push­ing lend­ing rates up to 37 per­cent in com­mer­cial banks. As this deterred any bor­row­ing for pro­duc­tion the eco­nomy’s sup­ply side pres­sures kept rising.

The money sup­ply growth has also been adding pres­sure on the for­eign reserves, mak­ing access to forex extremely dif­fi­cult. Fin­ance Min­is­ter Joseph Mwanam­vekha said it is high time the elite stopped dis­cuss­ing and star­ted act­ing.

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“We want to do things, not only, right but also faster, effi­ciently and timely. The time to change is now. We have been hold­ing these meet­ings for too long and it’s time for action,” Mwanam­vekha said in a key­note address. Per­haps such actions have already star­ted with the vis­ible scale down of bor­row­ing, as noted by the MEM report. The Treas­ury had turned down treas­ury bills, cre­at­ing panic in the fin­an­cial sec­tor as banks have now turned to the private sec­tor, offer­ing loans. Malawi Con­fed­er­a­tion of Cham­bers of Com­merce and Industry Pres­id­ent Wisely Phiri hailed the gov­ern­ment for its recent steps towards sta­bil­ising the eco­nomy.

“Whatever the gov­ern­ment is doing to reduce bor­row­ing is work­ing,” he said. World Bank Coun­try Man­ager Firas Raad acknow­ledged policy man­agers already under­way, stress­ing on the need to sus­tain them and ensure four crit­ical object­ives that include, restor­ing macro eco­nomic sta­bil­ity, enabling private sec­tor dynam ism , improv­ing pub­lic ser­vice deliv­ery and strength­en­ing Infra­struc­ture for growth. “We recom­mend recent efforts by the gov­ern­ment to slow down on bor­row­ing and reduce expendit­ure. These efforts need to be sus­tained to attain the much needed sta­bil­ity and eco­nomic growth,” Raad said.

This is the 22nd report the bank has issued, cen­ter­ing on chal­lenges and policy recom­mend­a­tions to increase exports.

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