Govt poverty strategy flops

The second Malawi Growth and Development Strategy (MGDS II) failed to reduce poverty generally and worsened deprivation in urban areas, The Nation has learnt.

According to a review report of MGDS II—implemented between 2011 and 2016— headcount poverty remained largely unchanged in a statistically significant way between 2010 and 2013, standing at 40.2 percent and 38.7 percent respectively.

Headcount poverty refers to the proportion of the population that lives below the poverty line, defined by the World Bank as when a person exists on $1.90 (around K1 300 at current exchange rates) per day.

What worsened during the MGDS II’s implementation was urban poverty which—between 2010 and 2013, surged 8.3 percent from 17.9 percent to 26.2 percent.

The sharp jump in urban poverty poses a fresh headache to policy makers who have traditionally invested a lot of thoughts and resources in tackling rural poverty while paying a cursory glance to the urban poor.

On the other hand, rural poverty may have marginally improved over the period from 44 percent in 2011 to 40.9 in 2013. However, looked at proportionally in terms of the urban-rural population, the situation is much worse in villages.

Although rural areas account for about 83 percent of Malawi’s population, they made up 94 percent of the poor in 2010 and 90 percent in 2013.

This, says the report, explains why during the first three years of MGDS II, the national poverty marginally declined by 1.5 percent to 38.7 percent, largely driven by declines in rural poverty by -3.1 percent to 40.9 percent.

States the report: “Under MGDS II Malawi has not achieved the poverty reduction consistent with her international commitments as represented by the MDGs [Millennium Development Goals] either. Poverty remained high and a predominantly rural phenomenon.”

To understand how spectacularly MGDS II underperformed, one has to look at the assumptions on whose realisation the strategy was premised.

But trends in gross domestic product (GDP) growth rates during MGDS II were well off target and were even too low to have a dent on poverty.

Picture this.

To achieve the rates of poverty alleviation envisaged in MGDS II, Malawi’s economic growth was supposed to average about 7.2 percent per annum between 2011 and 2016.

But growth ranged from 1.9 to 5.7 percent with an average of 4.2 percent over the period.

Based on the 2012 population census—where the average population growth rate was estimated at 2.8 percent—under MGDS II, growth in output per capita would range from -0.7 to 2.9 percent with an average of 1.8 percent, according to the report.

This rate would be too negligible to positively impact on the country’s poverty levels.

The assumption on prudent financial management would be a joke if it were not such a serious factor during the MGDS II implementation.

The so-called K577 billion Cashgate—now reduced to K236 billion—mostly happened between 2009 and 2014, leaving little fiscal space to finance the budget and realise MGDS II aspirations.

In terms of political stability, this too was a problem.

While there were no violent conflicts over the 2011-16 period, the MGDS II endured three administrations—the late Bingu wa Mutharika’s; the Joyce Banda leadership and the current Peter Mutharika regime.

Each of these administrations appears to have had variant policy priorities, ignoring the blue-print that largely remained unexecuted.

The 2011-2016 period saw some of the most volatile macroeconomic environments—double digit inflation rates; interest rates that basked in their 30s, a local currency that was not just abruptly weakened in 2012 and kept on softening thereafter, but could not be planned around with any degree of predictability.

This hit the engine of growth, the private sector, hard to the extent that most either down-sized or closed shop all together.

Diversification of the export base flopped with tobacco remaining number one foreign currency earner even as its proceeds dwindled annually while public debt jumped amid theft-induced and budgetary support freeze-driven budget deficits.

Thus, there were little resources to implement MGDS II and precious little political will to get things done or improve public finance and economic management in general. Governance, both economic and political, went to the dogs with Cashgate being one of the devastating results; and leadership that had little respect for the rule of law.

And even with the economic shocks—fuel and forex shortages in 2010-12; currency devaluation and resultant floatation that hit the poor harder—social protection measures were too little, poorly designed and, therefore, too ineffective to really cushion the poor.

Is it any wonder that the needle barely moved on the poverty index and dipped dramatically on urban poverty?

What can be done?

So, what should the MGDS III—if it will be called that—do to achieve better results than its predecessor?

The first—but not necessarily the most important—would be to clean up the public service so that it is more responsive and accountable.

The reforms, which appear to have been derailed, would have been the major driver here.

There should be more seriousness in Public Finance and Economic Management (PFEM) chain; the neglected private sector deserves a better operating environment while the agriculture industry—contributing at least 30 percent to GDP—needs a complete overhaul to deliver the kind of growth that can cut poverty.

There should now be more focus on poverty reduction-centric policy making to cut inequalities and reduce suffering while taming the ongoing population boom and leveraging Malawi’s demographic dividend much better than has been the case.

And for too long, policy makers have neglected job creation in favour of entitlements that add little to the economy—employment prioritisation should come out strongly in the next strategy.

The country must also get its education and health of its people right—with better funding, efficient management of resources and support systems that improve quality outcomes.

And, of course, the future strategy should have fewer priorities because nine was just too many for the country’s pitiful resource envelop. n