Economy in stalemate: any remedy?

The Malawi economy has been growing at an average rate of about four percent for the last three decades, according to available data. This is shy of the average annual growth of 6.1 percent, which development economists often argue could take half of the country’s population out of poverty by 2030

Consequently, over 70 percent of the country’s population lives in poverty, surviving on less than $2.15, which is the international poverty line.

However, this is despite authorities’ efforts to change the country’s economic fortunes over the years.

Efforts made?

Since the early 1990s, Malawi has adopted several policies to deal with poverty.

In 1994, Malawi adopted the Poverty Alleviation Programme, which aspired to raise national productivity through sustainable broad-based economic development and socio-cultural development.

In 1998, Malawi launched the Vision 2020 which aspired to make Malawi self-reliant with equal opportunities for and active participation by all, having social services, vibrant cultural and religious values and a technologically-driven middle income economy.

Its successor strategy, Malawi 2063 (MW2063)aspires to have an inclusively wealthy and self-reliant nation by 2063, with the population having a knowledge-based upper middle-income and industrialised economy built around three pillars of agricultural productivity and commercialisation, industrialisation and urbanisation.

However, between the Vision 2023 and MW2063,  Malawi developed and adopted the Malawi Poverty Reduction Strategy, the Malawi Economic Growth Strategy and the Malawi Growth and Development Strategy (MGDS) I, II and III, among others.

 Why is Malawi losing the poverty fight?

The National Planning Commission (NPC) Malawi 2063 First 10-Year Implementation Plan (MIP-1) analysis observed that while the Covid-19 pandemic has made the poverty fight difficult, other factors include a high population growth rate, limited access to financial services and high levels of corruption.

The NPC analysis indicated that several interventions are being implemented, including social protection programmes which seek to improve food security at the household and national level and reduce poverty.

Economists Association of Malawi acting president Bertha Bangara-Chikadza concedes that Malawi has not achieved much from previous development plans and the current state of the economy is testament to this.

She said: “Solid economic policies are central in achieving economic growth in the country.

“With this in mind, it is generally agreed among development practitioners that Malawi has good national policies and development agendas.”

On his part, development economist and former Reserve Bank of Malawi Governor Dalitso Kabambe observed that Malawi has never embraced these policies wholesale for a reasonable timeframe to make a better judgement.

Need for policy shift?

Renowned economist and Press Corporation Limited plc group chief executive officer Ronald Mangani concedes that the current economic policy regime has failed to proffer credible solutions to the problem of the country’s slow economic growth.

In his paper published in the African Review of Economics and Finance titled ‘Smooth transitioning growth in Malawi: The role of economic policy, he argues that neoliberalism, an economic philosophy that emphasises the role of free markets and minimal government intervention, has not worked for Malawi for the past four decades.

Says Mangani, who is also an academic: “The liberalisation of the financial market assumes the existence of a fiscally sound government and a strong regulator, both of which are necessary conditions for ensuring that financial resources are directed to productive use.

“Instead, a fiscally weak government is  overburdened by growing demands for delivering public goods and services, combined with recourse to mere moral suasion as the sole means of regulating financial intermediation.”

However, Kabambe observes that in the case of Malawi, adopting new institution economics, which is being widely debated as the new economic construct, would help solve Malawi’s growth problems.

He says: “This branch of economics proposes the middle ground between the two economic constructs. It argues that where markets work under neoliberalism economic constructs, proceed to use it.

“But where markets fail, then follow pragmatic approaches of supporting and coordinating them.”

Is there any hope for Malawi?

NPC director general Thomas Chataghalala Munthali says if government continues on the current trajectory, Malawi will only achieve the target of graduating to a lower middle-income economy with a gross national income per capita of $1 036 by 2045.

He says the local economy will, however, have to grow by at least 10 percent annually in the remaining six years to achieve the initial goal of graduating in 2030.

However, according to Munthali, Malawi is unlikely to become a lower middle income country by 2030 and may only reach the goal 15 years later if it remains on the current lethargic path.

He says a series of external crises that have spilled over to Malawi and internal catastrophes have derailed the local economy from growing at the six percent minimum needed to reach the promised lands.

Says Munthali: “The major concern is that private sector dynamism and mindset change, a key enabler, have the highest number of interventions that have not yet commenced.

“Economic infrastructure is also experiencing delays with most of the road projects skewed towards road infrastructure.”