Arrears payment to ease job losses—Ecam
Employers Consultative Association of Malawi (Ecam), a grouping of private sector employers, says government’s commitment to pay arrears owed to companies in the current fiscal year will improve liquidity and reduce job losses.
Ecam’s sentiments come as companies are currently struggling with liquidity needs due to Covid-19 pandemic, which has slowed down business performance while government has been non-committal to pay arrears for supplied goods and services.
In his Mid-year Budget Review Statement delivered in Parliament in Lilongwe on Friday, Minister of Finance Felix Mlusu assured that Treasury is committed to paying the arrears subject to verification by the Auditor General’s office.
Reacting to the development, Ecam executive director George Khaki said Treasury’s move certainly increases liquidity to help companies maintain jobs which the economy needs.
Said Khaki: “Gains from this are likely to increase demand for goods and services.
While commiserating with government on the situation it is in due to Covid-19, Ecam urges government not to over borrow because this not only crowds out the private sector to access finances, but also makes borrowing more expensive which we don’t need now.”
In his speech, Mlusu said to support the business community during the Covid-19 pandemic, government has started payment of arrears as one way of injecting liquidity into the economy.
“Under this programme, small and medium enterprises will be prioritised. Cash payments will be made on smaller amounts while promissory notes will be issued for large amounts,” he said.
During the last meeting, Parliament authorised government to borrow from the World Bank $86 million (about K63.6 billion) for the Financial Inclusion and Entrepreneurship Scaling Project.
Mlusu said the project is now effective and the World Bank disbursed $15 million (about K11.5 billion).
He said government through the Reserve Bank of Malawi is working with local banks on modalities through which SMEs will access financing whose disbursement will commence mid-March.
Chamber of Small and Medium Businesses Association executive secretary James Chiutsi said SMEs face challenges to access capital; hence, the intervention by the government is welcome.
In its recent assessment of the impact of Covid-19 on employment in Malawi last year, Ecam and the International Labour Organisation estimated that the pandemic would cost the Malawi labour market between 273 712 and 680 496 in current and future jobs.
